Correlation Between Sabine Royalty and Occidental Petroleum

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

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

Diversification Opportunities for Sabine Royalty and Occidental Petroleum

-0.41

Correlation Coefficient

Sabine Royalty  Occidental Petroleum

Very good diversification

The 3 months correlation between Sabine and Occidental is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sabine Royalty Trust and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum and Sabine Royalty 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 Sabine Royalty 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 Sabine Royalty i.e., Sabine Royalty and Occidental Petroleum go up and down completely randomly.

Pair Corralation between Sabine Royalty and Occidental Petroleum

Considering the 90-day investment horizon Sabine Royalty Trust is expected to generate 0.86 times more return on investment than Occidental Petroleum. However, Sabine Royalty Trust is 1.16 times less risky than Occidental Petroleum. It trades about -0.01 of its potential returns per unit of risk. Occidental Petroleum is currently generating about -0.24 per unit of risk. If you would invest  6,237  in Sabine Royalty Trust on September 22, 2024 and sell it today you would lose (37.00) from holding Sabine Royalty Trust or give up 0.59% of portfolio value over 90 days.

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

Sabine Royalty Trust  vs.  Occidental Petroleum

Sabine Royalty Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sabine Royalty Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Sabine Royalty is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail 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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sabine Royalty and Occidental Petroleum

The main advantage of trading using opposite Sabine Royalty and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabine Royalty 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 Sabine Royalty 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.