Correlation Between Cimarex Energy and Occidental Petroleum

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

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

Diversification Opportunities for Cimarex Energy and Occidental Petroleum

0.0

Correlation Coefficient

Cimarex Energy  Occidental Petroleum

Pay attention - limited upside

The 3 months correlation between Cimarex and Occidental is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cimarex Energy Co and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum and Cimarex Energy 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 Cimarex Energy Co 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 Cimarex Energy i.e., Cimarex Energy and Occidental Petroleum go up and down completely randomly.

Pair Corralation between Cimarex Energy and Occidental Petroleum

If you would invest  6,332  in Occidental Petroleum on January 26, 2024 and sell it today you would earn a total of  401.00  from holding Occidental Petroleum or generate 6.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Cimarex Energy Co  vs.  Occidental Petroleum

Cimarex Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Occidental Petroleum

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum are ranked lower than 16 (%) 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 Cimarex Energy and Occidental Petroleum

The main advantage of trading using opposite Cimarex Energy and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cimarex Energy 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 Cimarex Energy Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.