Correlation Between MV Oil and Occidental Petroleum

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

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

Diversification Opportunities for MV Oil and Occidental Petroleum

0.74

Correlation Coefficient

MV Oil  Occidental Petroleum

Poor diversification

The 3 months correlation between MVO and Occidental is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding MV Oil Trust and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum and MV Oil 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 MV Oil Trust 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 MV Oil i.e., MV Oil and Occidental Petroleum go up and down completely randomly.

Pair Corralation between MV Oil and Occidental Petroleum

Considering the 90-day investment horizon MV Oil Trust is expected to generate 1.56 times more return on investment than Occidental Petroleum. However, MV Oil is 1.56 times more volatile than Occidental Petroleum. It trades about -0.03 of its potential returns per unit of risk. Occidental Petroleum is currently generating about -0.1 per unit of risk. If you would invest  891.00  in MV Oil Trust on September 13, 2024 and sell it today you would lose (19.00) from holding MV Oil Trust or give up 2.13% of portfolio value over 90 days.

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

MV Oil Trust  vs.  Occidental Petroleum

MV Oil Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MV Oil Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, MV Oil is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Occidental Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Occidental Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Occidental Petroleum is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MV Oil and Occidental Petroleum

The main advantage of trading using opposite MV Oil and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MV Oil 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.

The idea behind MV Oil Trust and Occidental 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.