Correlation Between Occidental Petroleum and Vital Energy

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

By analyzing existing cross correlation between Occidental Petroleum and Vital Energy, you can compare the effects of market volatilities on Occidental Petroleum and Vital Energy 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 Vital Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and Vital Energy.

Diversification Opportunities for Occidental Petroleum and Vital Energy

0.57

Correlation Coefficient

Occidental Petroleum  Vital Energy

Very weak diversification

The 3 months correlation between Occidental and Vital is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and Vital Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Energy 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 Vital Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vital Energy has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and Vital Energy go up and down completely randomly.

Pair Corralation between Occidental Petroleum and Vital Energy

Considering the 90-day investment horizon Occidental Petroleum is expected to generate 0.49 times more return on investment than Vital Energy. However, Occidental Petroleum is 2.05 times less risky than Vital Energy. It trades about 0.02 of its potential returns per unit of risk. Vital Energy is currently generating about -0.12 per unit of risk. If you would invest  4,821  in Occidental Petroleum on December 29, 2024 and sell it today you would earn a total of  62.00  from holding Occidental Petroleum or generate 1.29% return on investment over 90 days.

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

Occidental Petroleum  vs.  Vital Energy

Occidental Petroleum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Vital Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vital Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Occidental Petroleum and Vital Energy

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

The idea behind Occidental Petroleum and Vital Energy 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.