Correlation Between Vermilion Energy and Occidental Petroleum
Can any of the company-specific risk be diversified away by investing in both Vermilion Energy and Occidental Petroleum at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vermilion Energy and Occidental Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vermilion Energy and Occidental Petroleum, you can compare the effects of market volatilities on Vermilion Energy and Occidental Petroleum and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vermilion Energy with a short position of Occidental Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vermilion Energy and Occidental Petroleum.
Diversification Opportunities for Vermilion Energy and Occidental Petroleum
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vermilion and Occidental is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vermilion Energy and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum and Vermilion Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vermilion Energy are associated (or correlated) with Occidental Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Occidental Petroleum has no effect on the direction of Vermilion Energy i.e., Vermilion Energy and Occidental Petroleum go up and down completely randomly.
Pair Corralation between Vermilion Energy and Occidental Petroleum
Considering the 90-day investment horizon Vermilion Energy is expected to generate 1.34 times more return on investment than Occidental Petroleum. However, Vermilion Energy is 1.34 times more volatile than Occidental Petroleum. It trades about 0.43 of its potential returns per unit of risk. Occidental Petroleum is currently generating about 0.55 per unit of risk. If you would invest 878.00 in Vermilion Energy on October 20, 2024 and sell it today you would earn a total of 134.00 from holding Vermilion Energy or generate 15.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vermilion Energy vs. Occidental Petroleum
Performance |
| Timeline |
| Vermilion Energy |
| Occidental Petroleum |
Vermilion Energy and Occidental Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vermilion Energy and Occidental Petroleum
The main advantage of trading using opposite Vermilion Energy and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vermilion Energy position performs unexpectedly, Occidental Petroleum can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Occidental Petroleum will offset losses from the drop in Occidental Petroleum's long position.| Vermilion Energy vs. Baytex Energy Corp | Vermilion Energy vs. Obsidian Energy | Vermilion Energy vs. Canadian Natural Resources | Vermilion Energy vs. Ovintiv |
| Occidental Petroleum vs. Coterra Energy | Occidental Petroleum vs. Diamondback Energy | Occidental Petroleum vs. ConocoPhillips | Occidental Petroleum vs. EOG Resources |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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