Correlation Between EOG Resources and Hess

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

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

Diversification Opportunities for EOG Resources and Hess

0.54

Correlation Coefficient

EOG Resources  Hess

Very weak diversification

The 3 months correlation between EOG and Hess is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and Hess Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess and EOG 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 EOG Resources are associated (or correlated) with Hess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess has no effect on the direction of EOG Resources i.e., EOG Resources and Hess go up and down completely randomly.

Pair Corralation between EOG Resources and Hess

Considering the 90-day investment horizon EOG Resources is expected to generate 2.6 times less return on investment than Hess. In addition to that, EOG Resources is 1.06 times more volatile than Hess Corporation. It trades about 0.08 of its total potential returns per unit of risk. Hess Corporation is currently generating about 0.23 per unit of volatility. If you would invest  13,025  in Hess Corporation on December 26, 2024 and sell it today you would earn a total of  2,804  from holding Hess Corporation or generate 21.53% return on investment over 90 days.

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

EOG Resources  vs.  Hess Corp.

EOG Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EOG Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, EOG Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hess

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Corporation are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Hess unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EOG Resources and Hess

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

The idea behind EOG Resources and Hess Corporation 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.