Correlation Between California Resources and North European

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

By analyzing existing cross correlation between California Resources Corp and North European Oil, you can compare the effects of market volatilities on California Resources and North European 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 California Resources with a short position of North European. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Resources and North European.

Diversification Opportunities for California Resources and North European

-0.74

Correlation Coefficient

California Resources  North European

Pay attention - limited upside

The 3 months correlation between California and North is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding California Resources Corp and North European Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North European Oil and California Resources 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 California Resources Corp are associated (or correlated) with North European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North European Oil has no effect on the direction of California Resources i.e., California Resources and North European go up and down completely randomly.

Pair Corralation between California Resources and North European

Considering the 90-day investment horizon California Resources Corp is expected to generate 0.73 times more return on investment than North European. However, California Resources Corp is 1.37 times less risky than North European. It trades about 0.04 of its potential returns per unit of risk. North European Oil is currently generating about -0.12 per unit of risk. If you would invest  5,197  in California Resources Corp on September 18, 2024 and sell it today you would earn a total of  184.00  from holding California Resources Corp or generate 3.54% return on investment over 90 days.

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

California Resources Corp  vs.  North European Oil

California Resources Corp

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in California Resources Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, California Resources is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

North European Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North European Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with California Resources and North European

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

The idea behind California Resources Corp and North European Oil 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.