Correlation Between Barnwell Industries and Occidental Petroleum

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

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

Diversification Opportunities for Barnwell Industries and Occidental Petroleum

0.68

Correlation Coefficient

Barnwell Industries  Occidental Petroleum

Poor diversification

The 3 months correlation between Barnwell and Occidental is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Barnwell Industries and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum and Barnwell Industries 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 Barnwell Industries 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 Barnwell Industries i.e., Barnwell Industries and Occidental Petroleum go up and down completely randomly.

Pair Corralation between Barnwell Industries and Occidental Petroleum

Considering the 90-day investment horizon Barnwell Industries is expected to generate 2.42 times more return on investment than Occidental Petroleum. However, Barnwell Industries is 2.42 times more volatile than Occidental Petroleum. It trades about 0.23 of its potential returns per unit of risk. Occidental Petroleum is currently generating about -0.15 per unit of risk. If you would invest  247.00  in Barnwell Industries on February 2, 2024 and sell it today you would earn a total of  39.00  from holding Barnwell Industries or generate 15.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Barnwell Industries  vs.  Occidental Petroleum

Barnwell Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barnwell Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Barnwell Industries displayed solid returns over the last few months and may actually be approaching a breakup point.

Occidental Petroleum

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Occidental Petroleum showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barnwell Industries and Occidental Petroleum

The main advantage of trading using opposite Barnwell Industries and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnwell Industries 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 Barnwell Industries 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.