Correlation Between Occidental Petroleum and EOG Resources
Can any of the company-specific risk be diversified away by investing in both Occidental Petroleum and EOG Resources 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 EOG Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Occidental Petroleum and EOG Resources, you can compare the effects of market volatilities on Occidental Petroleum and EOG Resources 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 EOG Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and EOG Resources.
Diversification Opportunities for Occidental Petroleum and EOG Resources
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Occidental and EOG is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and EOG Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EOG Resources 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 EOG Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EOG Resources has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and EOG Resources go up and down completely randomly.
Pair Corralation between Occidental Petroleum and EOG Resources
Assuming the 90 days trading horizon Occidental Petroleum is expected to generate 2.95 times more return on investment than EOG Resources. However, Occidental Petroleum is 2.95 times more volatile than EOG Resources. It trades about -0.12 of its potential returns per unit of risk. EOG Resources is currently generating about -0.41 per unit of risk. If you would invest 5,021 in Occidental Petroleum on September 23, 2024 and sell it today you would lose (213.00) from holding Occidental Petroleum or give up 4.24% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Occidental Petroleum vs. EOG Resources
Performance |
Timeline |
Occidental Petroleum |
EOG Resources |
Occidental Petroleum and EOG Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Occidental Petroleum and EOG Resources
The main advantage of trading using opposite Occidental Petroleum and EOG Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental Petroleum position performs unexpectedly, EOG Resources 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 EOG Resources will offset losses from the drop in EOG Resources' long position.Occidental Petroleum vs. ConocoPhillips | Occidental Petroleum vs. EOG Resources | Occidental Petroleum vs. Devon Energy | Occidental Petroleum vs. H1ES34 |
EOG Resources vs. ConocoPhillips | EOG Resources vs. Occidental Petroleum | EOG Resources vs. Devon Energy | EOG Resources vs. H1ES34 |
Check out your portfolio center.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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