Correlation Between Occidental Petroleum and Chevron Corp
Can any of the company-specific risk be diversified away by investing in both Occidental Petroleum and Chevron Corp 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 Chevron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Occidental Petroleum and Chevron Corp, you can compare the effects of market volatilities on Occidental Petroleum and Chevron Corp 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 Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and Chevron Corp.
Diversification Opportunities for Occidental Petroleum and Chevron Corp
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Occidental and Chevron is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and Chevron Corp go up and down completely randomly.
Pair Corralation between Occidental Petroleum and Chevron Corp
Considering the 90-day investment horizon Occidental Petroleum is expected to generate 1.58 times more return on investment than Chevron Corp. However, Occidental Petroleum is 1.58 times more volatile than Chevron Corp. It trades about 0.13 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.0 per unit of risk. If you would invest 6,406 in Occidental Petroleum on January 19, 2024 and sell it today you would earn a total of 205.00 from holding Occidental Petroleum or generate 3.2% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Occidental Petroleum vs. Chevron Corp
Performance |
Timeline |
Occidental Petroleum |
Chevron Corp |
Occidental Petroleum and Chevron Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Occidental Petroleum and Chevron Corp
The main advantage of trading using opposite Occidental Petroleum and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental Petroleum position performs unexpectedly, Chevron Corp 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.Occidental Petroleum vs. Pioneer Natural Resources | Occidental Petroleum vs. Coterra Energy | Occidental Petroleum vs. Diamondback Energy | Occidental Petroleum vs. ConocoPhillips |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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