Correlation Between PENN NATL and Occidental Petroleum

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

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

Diversification Opportunities for PENN NATL and Occidental Petroleum

0.07

Correlation Coefficient

PENN NATL  Occidental Petroleum

Significant diversification

The 3 months correlation between PENN and Occidental is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum and PENN NATL 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 PENN NATL GAMING 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 PENN NATL i.e., PENN NATL and Occidental Petroleum go up and down completely randomly.

Pair Corralation between PENN NATL and Occidental Petroleum

Assuming the 90 days trading horizon PENN NATL is expected to generate 1.03 times less return on investment than Occidental Petroleum. In addition to that, PENN NATL is 2.11 times more volatile than Occidental Petroleum. It trades about 0.17 of its total potential returns per unit of risk. Occidental Petroleum is currently generating about 0.37 per unit of volatility. If you would invest  4,591  in Occidental Petroleum on October 23, 2024 and sell it today you would earn a total of  463.00  from holding Occidental Petroleum or generate 10.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

PENN NATL GAMING  vs.  Occidental Petroleum

PENN NATL GAMING

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, PENN NATL exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain fundamental indicators, Occidental Petroleum may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PENN NATL and Occidental Petroleum

The main advantage of trading using opposite PENN NATL and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL 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 PENN NATL GAMING 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 Commodity Directory module to find actively traded commodities issued by global exchanges.