Correlation Between Occidental Petroleum and Diamondback Energy
Can any of the company-specific risk be diversified away by investing in both Occidental Petroleum and Diamondback 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 Occidental Petroleum and Diamondback Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Occidental Petroleum and Diamondback Energy, you can compare the effects of market volatilities on Occidental Petroleum and Diamondback 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 Occidental Petroleum with a short position of Diamondback Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental Petroleum and Diamondback Energy.
Diversification Opportunities for Occidental Petroleum and Diamondback Energy
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Occidental and Diamondback is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and Diamondback Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondback Energy 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 Diamondback Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondback Energy has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and Diamondback Energy go up and down completely randomly.
Pair Corralation between Occidental Petroleum and Diamondback Energy
Considering the 90-day investment horizon Occidental Petroleum is expected to generate 1.28 times more return on investment than Diamondback Energy. However, Occidental Petroleum is 1.28 times more volatile than Diamondback Energy. It trades about 0.18 of its potential returns per unit of risk. Diamondback Energy is currently generating about 0.2 per unit of risk. If you would invest 6,455 in Occidental Petroleum on January 25, 2024 and sell it today you would earn a total of 284.00 from holding Occidental Petroleum or generate 4.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Occidental Petroleum vs. Diamondback Energy
Performance |
| Timeline |
| Occidental Petroleum |
| Diamondback Energy |
Occidental Petroleum and Diamondback Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Occidental Petroleum and Diamondback Energy
The main advantage of trading using opposite Occidental Petroleum and Diamondback Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental Petroleum position performs unexpectedly, Diamondback 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 Diamondback Energy will offset losses from the drop in Diamondback Energy's long position.| Occidental Petroleum vs. Sabine Royalty Trust | Occidental Petroleum vs. Cross Timbers Royalty | Occidental Petroleum vs. MV Oil Trust | Occidental Petroleum vs. San Juan Basin |
| Diamondback Energy vs. Devon Energy | Diamondback Energy vs. Coterra Energy | Diamondback Energy vs. EOG Resources | Diamondback Energy vs. ConocoPhillips |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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