Correlation Between Woodside Energy and Occidental Petroleum
Can any of the company-specific risk be diversified away by investing in both Woodside 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 Woodside 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 Woodside Energy Group and Occidental Petroleum, you can compare the effects of market volatilities on Woodside 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 Woodside Energy with a short position of Occidental Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Woodside Energy and Occidental Petroleum.
Diversification Opportunities for Woodside Energy and Occidental Petroleum
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Woodside and Occidental is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Woodside Energy Group and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum and Woodside 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 Woodside Energy Group 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 Woodside Energy i.e., Woodside Energy and Occidental Petroleum go up and down completely randomly.
Pair Corralation between Woodside Energy and Occidental Petroleum
Assuming the 90 days trading horizon Woodside Energy Group is expected to generate 1.1 times more return on investment than Occidental Petroleum. However, Woodside Energy is 1.1 times more volatile than Occidental Petroleum. It trades about -0.02 of its potential returns per unit of risk. Occidental Petroleum is currently generating about -0.03 per unit of risk. If you would invest 1,530 in Woodside Energy Group on November 2, 2024 and sell it today you would lose (72.00) from holding Woodside Energy Group or give up 4.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Woodside Energy Group vs. Occidental Petroleum
Performance |
| Timeline |
| Woodside Energy Group |
| Occidental Petroleum |
Woodside Energy and Occidental Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Woodside Energy and Occidental Petroleum
The main advantage of trading using opposite Woodside Energy and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woodside 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.| Woodside Energy vs. Fukuyama Transporting Co | Woodside Energy vs. Gaztransport Technigaz SA | Woodside Energy vs. BII Railway Transportation | Woodside Energy vs. Yuexiu Transport Infrastructure |
| Occidental Petroleum vs. Alibaba Group Holding | Occidental Petroleum vs. ConocoPhillips | Occidental Petroleum vs. CNOOC | 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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