Correlation Between Alphabet and Occidental Petroleum

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Can any of the company-specific risk be diversified away by investing in both Alphabet 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 Alphabet and Occidental Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Cl A and Occidental Petroleum Corp, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of Occidental Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Occidental Petroleum.

Diversification Opportunities for Alphabet and Occidental Petroleum

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between Alphabet and Occidental is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Cl A and Occidental Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum Corp and Alphabet 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 Alphabet Cl A 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 Corp has no effect on the direction of Alphabet i.e., Alphabet and Occidental Petroleum go up and down completely randomly.

Pair Corralation between Alphabet and Occidental Petroleum

Assuming the 90 days horizon Alphabet Cl A is expected to under-perform the Occidental Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Cl A is 1.52 times less risky than Occidental Petroleum. The stock trades about -0.16 of its potential returns per unit of risk. The Occidental Petroleum Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,004  in Occidental Petroleum Corp on July 7, 2022 and sell it today you would earn a total of  613.00  from holding Occidental Petroleum Corp or generate 10.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Alphabet Cl A  vs.  Occidental Petroleum Corp

 Performance (%) 
       Timeline  
Alphabet Cl A 
Alphabet Performance
0 of 100
Over the last 90 days Alphabet Cl A has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively steady which may send shares a bit higher in November 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Alphabet Price Channel

Occidental Petroleum Corp 
Occidental Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Occidental Petroleum may actually be approaching a critical reversion point that can send shares even higher in November 2022.

Occidental Price Channel

Alphabet and Occidental Petroleum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alphabet and Occidental Petroleum

The main advantage of trading using opposite Alphabet and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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.
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The idea behind Alphabet Cl A and Occidental Petroleum Corp 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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Check out your portfolio center. 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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