Correlation Between Walmart and Occidental Petroleum

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

Diversification Opportunities for Walmart and Occidental Petroleum

0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Walmart and Occidental is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Walmart 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 Walmart 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 Walmart 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 Walmart i.e., Walmart and Occidental Petroleum go up and down completely randomly.

Pair Corralation between Walmart and Occidental Petroleum

Considering the 90-day investment horizon Walmart is expected to generate 3.12 times less return on investment than Occidental Petroleum. But when comparing it to its historical volatility, Walmart is 1.89 times less risky than Occidental Petroleum. It trades about 0.02 of its potential returns per unit of risk. Occidental Petroleum Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,688  in Occidental Petroleum Corp on July 8, 2022 and sell it today you would earn a total of  86.00  from holding Occidental Petroleum Corp or generate 1.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Walmart  vs.  Occidental Petroleum Corp

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

Walmart Price Channel

Occidental Petroleum Corp 
Occidental Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Occidental Petroleum showed solid returns over the last few months and may actually be approaching a breakup point.

Occidental Price Channel

Walmart and Occidental Petroleum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and Occidental Petroleum

The main advantage of trading using opposite Walmart and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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.
Walmart vs. Amazon Inc
The idea behind Walmart 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.
Occidental Petroleum vs. Amazon Inc
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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