Correlation Between California Resources and Whiting Petroleum

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

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

Diversification Opportunities for California Resources and Whiting Petroleum

0.0

Correlation Coefficient

California Resources  Whiting Petroleum

Pay attention - limited upside

The 3 months correlation between California and Whiting is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding California Resources and Whiting Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whiting Petroleum 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 are associated (or correlated) with Whiting Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whiting Petroleum has no effect on the direction of California Resources i.e., California Resources and Whiting Petroleum go up and down completely randomly.

Pair Corralation between California Resources and Whiting Petroleum

If you would invest  280.00  in Whiting Petroleum on December 22, 2024 and sell it today you would lose (100.00) from holding Whiting Petroleum or give up 35.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

California Resources  vs.  Whiting Petroleum

California Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days California Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, California Resources is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Whiting Petroleum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Whiting Petroleum are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental drivers, Whiting Petroleum showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with California Resources and Whiting Petroleum

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

The idea behind California Resources and Whiting Petroleum 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.