Correlation Between Berry Petroleum and California Resources

Can any of the company-specific risk be diversified away by investing in both Berry Petroleum and California Resources 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 Berry Petroleum and California Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Berry Petroleum Corp and California Resources Corp, you can compare the effects of market volatilities on Berry Petroleum and California Resources 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 Berry Petroleum with a short position of California Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berry Petroleum and California Resources.

Diversification Opportunities for Berry Petroleum and California Resources

0.81

Correlation Coefficient

Berry Petroleum  California Resources

Very poor diversification

The 3 months correlation between Berry and California is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Berry Petroleum Corp and California Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Resources Corp and Berry Petroleum 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 Berry Petroleum Corp are associated (or correlated) with California Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Resources Corp has no effect on the direction of Berry Petroleum i.e., Berry Petroleum and California Resources go up and down completely randomly.

Pair Corralation between Berry Petroleum and California Resources

Considering the 90-day investment horizon Berry Petroleum Corp is expected to under-perform the California Resources. In addition to that, Berry Petroleum is 1.35 times more volatile than California Resources Corp. It trades about -0.08 of its total potential returns per unit of risk. California Resources Corp is currently generating about -0.08 per unit of volatility. If you would invest  5,005  in California Resources Corp on December 29, 2024 and sell it today you would lose (581.00) from holding California Resources Corp or give up 11.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Berry Petroleum Corp  vs.  California Resources Corp

Berry Petroleum Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Berry Petroleum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

California Resources Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days California Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Berry Petroleum and California Resources

The main advantage of trading using opposite Berry Petroleum and California Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berry Petroleum position performs unexpectedly, California Resources 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 California Resources will offset losses from the drop in California Resources' long position.

The idea behind Berry Petroleum Corp and California Resources Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..