Correlation Between Dow Jones and Occidental Petroleum
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Occidental Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Occidental Petroleum, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Occidental Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Occidental Petroleum.
Diversification Opportunities for Dow Jones and Occidental Petroleum
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and Occidental is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Occidental Petroleum go up and down completely randomly.
Pair Corralation between Dow Jones and Occidental Petroleum
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Occidental Petroleum. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 2.28 times less risky than Occidental Petroleum. The index trades about -0.04 of its potential returns per unit of risk. The Occidental Petroleum is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 4,665 in Occidental Petroleum on December 30, 2024 and sell it today you would lose (154.00) from holding Occidental Petroleum or give up 3.3% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 96.88% |
Values | Daily Returns |
Dow Jones Industrial vs. Occidental Petroleum
Performance |
Timeline |
Dow Jones and Occidental Petroleum Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Occidental Petroleum
Pair trading matchups for Occidental Petroleum
Pair Trading with Dow Jones and Occidental Petroleum
The main advantage of trading using opposite Dow Jones and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.Dow Jones vs. Highway Holdings Limited | Dow Jones vs. Companhia Siderurgica Nacional | Dow Jones vs. POSCO Holdings | Dow Jones vs. Grupo Simec SAB |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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