Correlation Between California Resources and Berry Petroleum

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

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

Diversification Opportunities for California Resources and Berry Petroleum

0.81

Correlation Coefficient

California Resources  Berry Petroleum

Very poor diversification

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

Pair Corralation between California Resources and Berry Petroleum

Considering the 90-day investment horizon California Resources Corp is expected to generate 0.74 times more return on investment than Berry Petroleum. However, California Resources Corp is 1.35 times less risky than Berry Petroleum. It trades about -0.08 of its potential returns per unit of risk. Berry Petroleum Corp is currently generating about -0.08 per unit of risk. 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

California Resources Corp  vs.  Berry Petroleum Corp

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.

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.

Pair Trading with California Resources and Berry Petroleum

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

The idea behind California Resources Corp and Berry Petroleum 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.