Correlation Between EOG Resources and Woodside Petroleum

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

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

Diversification Opportunities for EOG Resources and Woodside Petroleum

0.09

Correlation Coefficient

EOG Resources  Woodside Petroleum

Significant diversification

The 3 months correlation between EOG and Woodside is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and Woodside Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodside Petroleum 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 Woodside Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodside Petroleum has no effect on the direction of EOG Resources i.e., EOG Resources and Woodside Petroleum go up and down completely randomly.

Pair Corralation between EOG Resources and Woodside Petroleum

Considering the 90-day investment horizon EOG Resources is expected to generate 3.74 times less return on investment than Woodside Petroleum. But when comparing it to its historical volatility, EOG Resources is 4.11 times less risky than Woodside Petroleum. It trades about 0.02 of its potential returns per unit of risk. Woodside Petroleum is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,745  in Woodside Petroleum on September 14, 2024 and sell it today you would lose (231.00) from holding Woodside Petroleum or give up 13.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.26%
Values	Daily Returns

EOG Resources  vs.  Woodside Petroleum

EOG Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EOG Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, EOG Resources is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Woodside Petroleum

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Woodside Petroleum are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Woodside Petroleum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with EOG Resources and Woodside Petroleum

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

The idea behind EOG Resources and Woodside 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.