Correlation Between Waste Management and Occidental Petroleum
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and Occidental Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Occidental Petroleum, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of Occidental Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Occidental Petroleum.
Diversification Opportunities for Waste Management and Occidental Petroleum
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Waste and Occidental is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum and Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Occidental Petroleum go up and down completely randomly.
Pair Corralation between Waste Management and Occidental Petroleum
Assuming the 90 days trading horizon Waste Management is expected to under-perform the Occidental Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, Waste Management is 1.21 times less risky than Occidental Petroleum. The stock trades about -0.12 of its potential returns per unit of risk. The Occidental Petroleum is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 4,859 in Occidental Petroleum on October 16, 2024 and sell it today you would earn a total of 469.00 from holding Occidental Petroleum or generate 9.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. Occidental Petroleum
Performance |
| Timeline |
| Waste Management |
| Occidental Petroleum |
Waste Management and Occidental Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Occidental Petroleum
The main advantage of trading using opposite Waste Management and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. United Natural Foods, | Waste Management vs. Hormel Foods | Waste Management vs. United States Steel | Waste Management vs. Monster Beverage |
| Occidental Petroleum vs. Paycom Software | Occidental Petroleum vs. Healthpeak Properties | Occidental Petroleum vs. Hospital Mater Dei | Occidental Petroleum vs. Microchip Technology Incorporated |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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