Correlation Between Woodside Petroleum and Woodside Energy

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

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

Diversification Opportunities for Woodside Petroleum and Woodside Energy

0.64

Correlation Coefficient

Woodside Petroleum  Woodside Energy

Poor diversification

The 3 months correlation between Woodside and Woodside is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Woodside Petroleum and Woodside Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodside Energy Group and Woodside 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 Woodside Petroleum are associated (or correlated) with Woodside Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodside Energy Group has no effect on the direction of Woodside Petroleum i.e., Woodside Petroleum and Woodside Energy go up and down completely randomly.

Pair Corralation between Woodside Petroleum and Woodside Energy

Assuming the 90 days horizon Woodside Petroleum is expected to generate 3.24 times more return on investment than Woodside Energy. However, Woodside Petroleum is 3.24 times more volatile than Woodside Energy Group. It trades about 0.01 of its potential returns per unit of risk. Woodside Energy Group is currently generating about -0.06 per unit of risk. If you would invest  1,983  in Woodside Petroleum on September 13, 2024 and sell it today you would lose (449.00) from holding Woodside Petroleum or give up 22.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.73%
Values	Daily Returns

Woodside Petroleum  vs.  Woodside Energy Group

Woodside Petroleum

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Woodside Petroleum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Woodside Petroleum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Woodside Energy Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woodside Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Woodside Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Woodside Petroleum and Woodside Energy

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

The idea behind Woodside Petroleum and Woodside Energy Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.