Correlation Between Occidental Petroleum and WOODSIDE ENE

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

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

Diversification Opportunities for Occidental Petroleum and WOODSIDE ENE

0.67

Correlation Coefficient

Occidental Petroleum  WOODSIDE ENE

Poor diversification

The 3 months correlation between Occidental and WOODSIDE is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and WOODSIDE ENE SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WOODSIDE ENE SPADR and Occidental Petroleum 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 Occidental Petroleum are associated (or correlated) with WOODSIDE ENE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WOODSIDE ENE SPADR has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and WOODSIDE ENE go up and down completely randomly.

Pair Corralation between Occidental Petroleum and WOODSIDE ENE

Assuming the 90 days trading horizon Occidental Petroleum is expected to generate 0.54 times more return on investment than WOODSIDE ENE. However, Occidental Petroleum is 1.86 times less risky than WOODSIDE ENE. It trades about 0.07 of its potential returns per unit of risk. WOODSIDE ENE SPADR is currently generating about 0.01 per unit of risk. If you would invest  4,746  in Occidental Petroleum on October 20, 2024 and sell it today you would earn a total of  310.00  from holding Occidental Petroleum or generate 6.53% return on investment over 90 days.

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

Occidental Petroleum  vs.  WOODSIDE ENE SPADR

Occidental Petroleum

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Occidental Petroleum may actually be approaching a critical reversion point that can send shares even higher in February 2025.

WOODSIDE ENE SPADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WOODSIDE ENE SPADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WOODSIDE ENE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Occidental Petroleum and WOODSIDE ENE

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

The idea behind Occidental Petroleum and WOODSIDE ENE SPADR 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .