uploads///correlation of oil weighted stocks

Fed Fear and Crude Oil: Identifying Stocks with a High Correlation

By

Nov. 20 2020, Updated 3:19 p.m. ET

US crude oil

On August 29, 2016, US crude oil (USO) (OIIL) (USL) (SCO) contracts for October delivery closed at $46.98 per barrel—1.4% below their previous closing price. It’s 8.3% below the highest level for active contracts in 2016 of $51.23 per barrel achieved on June 8.

Last week, crude oil prices fell due to supply glut fears. On August 29, 2016, crude oil prices fell due to market expectations of a rate hike next month. The US Dollar Index (UUP) rallied 1.1% between August 22 and August 29, 2016.

In this series, we’ll take a close look at the correlations between crude oil–weighted stocks and crude oil. We’ll also look at the correlations between natural gas–weighted stocks and natural gas.

Article continues below advertisement

Oil-weighted stocks

Let’s look at some of the upstream companies that are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and operate with a production mix of at least 60% in crude oil. Below are the correlations of these oil-weighted companies with West Texas Intermediate crude oil from July 29 to August 29, 2016. You can also see these in the above table.

Oil-weighted stocks that are correlated strongly with crude oil over the last month include:

  • Murphy Oil (MUR) – 81.9%
  • Kosmos Energy (KOS) – 77.5%
  • Oasis Petroleum (OAS) – 77.2%
  • Whiting Petroleum (WLL) – 76.9%
  • Hess (HES) – 76.8%
  • RSP Permian (RSPP) – 76%
  • Denbury Resources (DNR) – 74.5%

Oil-weighted stocks that had the lowest correlation with crude oil include the following:

  • Diamondback Energy (FANG) – 52.3%
  • Synergy Resources (SYRG) – 48.8%

Investors who are bullish on crude oil might use some of the stocks that have a high correlation with crude oil to realign their portfolios.

In the next part of this series, we’ll look at the returns of crude oil–weighted stocks compared to crude oil.

Advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.