Correlation Between Occidental and Eagle Point

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

By analyzing existing cross correlation between Occidental Petroleum 44 and Eagle Point Credit, you can compare the effects of market volatilities on Occidental and Eagle Point 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 with a short position of Eagle Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental and Eagle Point.

Diversification Opportunities for Occidental and Eagle Point

-0.65

Correlation Coefficient

Occidental  Eagle Point

Excellent diversification

The 3 months correlation between Occidental and Eagle is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum 44 and Eagle Point Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Point Credit and Occidental 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 44 are associated (or correlated) with Eagle Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Point Credit has no effect on the direction of Occidental i.e., Occidental and Eagle Point go up and down completely randomly.

Pair Corralation between Occidental and Eagle Point

Assuming the 90 days trading horizon Occidental Petroleum 44 is expected to generate 13.36 times more return on investment than Eagle Point. However, Occidental is 13.36 times more volatile than Eagle Point Credit. It trades about 0.15 of its potential returns per unit of risk. Eagle Point Credit is currently generating about -0.19 per unit of risk. If you would invest  7,588  in Occidental Petroleum 44 on October 7, 2024 and sell it today you would earn a total of  987.00  from holding Occidental Petroleum 44 or generate 13.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	80.0%
Values	Daily Returns

Occidental Petroleum 44  vs.  Eagle Point Credit

Occidental Petroleum

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum 44 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Occidental sustained solid returns over the last few months and may actually be approaching a breakup point.

Eagle Point Credit

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Point Credit are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Eagle Point is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Occidental and Eagle Point

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

The idea behind Occidental Petroleum 44 and Eagle Point Credit 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 CEOs Directory module to screen CEOs from public companies around the world.