Correlation Between Occidental Petroleum and Santos

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

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

Diversification Opportunities for Occidental Petroleum and Santos

0.64

Correlation Coefficient

Occidental Petroleum  Santos

Poor diversification

The 3 months correlation between Occidental and Santos is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum and Santos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos 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 Santos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos has no effect on the direction of Occidental Petroleum i.e., Occidental Petroleum and Santos go up and down completely randomly.

Pair Corralation between Occidental Petroleum and Santos

Considering the 90-day investment horizon Occidental Petroleum is expected to generate 0.43 times more return on investment than Santos. However, Occidental Petroleum is 2.35 times less risky than Santos. It trades about -0.09 of its potential returns per unit of risk. Santos is currently generating about -0.04 per unit of risk. If you would invest  5,182  in Occidental Petroleum on September 17, 2024 and sell it today you would lose (442.00) from holding Occidental Petroleum or give up 8.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Occidental Petroleum  vs.  Santos

Occidental Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Occidental Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Santos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Santos has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Occidental Petroleum and Santos

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

The idea behind Occidental Petroleum and Santos 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.