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COP Failed to Rise despite High Correlation with Crude Oil

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ConocoPhillips’s correlations last week

As we saw in the previous part, ConocoPhillips (COP) stock rose marginally by 0.68% last week. Crude oil and the SPDR S&P 500 ETF (SPY) moved up by 4.0% and 0.97%, respectively, in the same week. However, natural gas was down by 9.2%. In this part, we will try to quantify the relationship between the daily movements of ConocoPhillips’s stock price and crude oil (USO) prices by studying COP’s correlation coefficient with crude oil in the last one week and last one month. We will also look at the extent to which COP’s stock price followed daily natural gas prices and the S&P 500 Index over these same timeframes.

Even though COP’s stock rose on Wednesday and Friday due to the rise in crude oil prices, the magnitude of COP’s move lagged that of crude oil’s rise of almost 4% during the same time. COP sock’s correlation with the SPDR S&P 500 ETF (SPY) stood at ~52%, meaning movements in COP’s stock price were also in tandem with the SPDR S&P 500 ETF (SPY) last week.

In comparison to crude oil and the SPDR S&P 500 ETF (SPY), COP stock’s correlation with natural gas was -76%, which means that movements in natural gas didn’t influence COP’s stock last week. COP’s stock has shown correlations of 19%, 40%, and 11% with crude oil (USO), natural gas (UNG), and the SPDR S&P 500 ETF (SPY) prices, respectively, over the last one month.

COP’s peers

COP’s peer Occidental Petroleum (OXY) had a correlation of ~64% with crude oil prices last week and rose 0.03% due to the increase in crude prices. OXY had a correlation of about -18% and 9% with natural gas and the SPDR S&P 500 ETF (SPY) last week, respectively. Occidental Petroleum’s production mix contains ~69% crude oil, so it has a high correlation with crude oil prices.

To know more about the correlation of various upstream stocks with various energy commodities, read Market Realist’s Fall in Energy Commodities Impacts Energy Stocks.

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