Correlation Between Whiting Petroleum and Occidental Petroleum

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

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

Diversification Opportunities for Whiting Petroleum and Occidental Petroleum

-0.38

Correlation Coefficient

Whiting Petroleum  Occidental Petroleum

Very good diversification

The 3 months correlation between Whiting and Occidental is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Whiting Petroleum and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum and Whiting 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 Whiting Petroleum 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 Whiting Petroleum i.e., Whiting Petroleum and Occidental Petroleum go up and down completely randomly.

Pair Corralation between Whiting Petroleum and Occidental Petroleum

If you would invest  6,379  in Occidental Petroleum on January 20, 2024 and sell it today you would earn a total of  284.00  from holding Occidental Petroleum or generate 4.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Whiting Petroleum  vs.  Occidental Petroleum

Whiting Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whiting Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Whiting Petroleum is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Occidental Petroleum

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Occidental Petroleum showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Whiting Petroleum and Occidental Petroleum

The main advantage of trading using opposite Whiting Petroleum and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whiting Petroleum 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 Whiting Petroleum 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.