Correlation Between Anadarko Petroleum and Newfield Exploration

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

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

Diversification Opportunities for Anadarko Petroleum and Newfield Exploration

0.0

Correlation Coefficient

Anadarko Petroleum  Newfield Exploration

Pay attention - limited upside

The 3 months correlation between Anadarko and Newfield is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Anadarko Petroleum and Newfield Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newfield Exploration and Anadarko 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 Anadarko Petroleum are associated (or correlated) with Newfield Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newfield Exploration has no effect on the direction of Anadarko Petroleum i.e., Anadarko Petroleum and Newfield Exploration go up and down completely randomly.

Pair Corralation between Anadarko Petroleum and Newfield Exploration

If you would invest (100.00) in Newfield Exploration on January 30, 2024 and sell it today you would earn a total of  100.00  from holding Newfield Exploration or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Anadarko Petroleum  vs.  Newfield Exploration

Anadarko Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anadarko Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Anadarko Petroleum is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Newfield Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newfield Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Newfield Exploration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Anadarko Petroleum and Newfield Exploration

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

The idea behind Anadarko Petroleum and Newfield Exploration 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.