These stocks could be the biggest winners and losers if oil prices rise
For investors looking to capitalize on the recent oil rally, here are some companies that stand to benefit from higher crude oil prices. West Texas Intermediate crude oil futures are rising sharply this week. After Saudi Arabia and Russia pledged to extend voluntary oil supply cuts this year, WTI crude and Brent contracts hit their highest level since last November on Tuesday. WTI surged in the quarter that began in July and has risen 24% since then. Higher oil prices could increase inflationary pressures and influence central bankers’ interest rate decisions. They can also have a negative impact on the overall stock market. However, for some companies, the higher correlation between oil prices means good news. CNBC Pro used LSEG data to examine the rolling 100-day correlations of Russell 1000 stocks to WTI futures and find out which names tend to follow oil the closest. We looked for names with current correlations of 0.6 or more. In other words, a 1% change in WTI would be associated with a 0.6% increase in the stock. The 10 most positively correlated stocks with oil are energy stocks, which tend to rise when oil prices rise. Marathon Oil has the highest current correlation coefficient of any name at 0.71, followed by Diamondback Energy, Devon Energy and APA. Diamondback and Devon both have an average correlation of around 0.7. Both have had good quarters, with Diamondback up nearly 19% and Devon up more than 10% this quarter. APA, the holding company of hydrocarbon exploration company Apache, was also on the list. The stock is having a hot quarter with a gain of 30%. North American oil company Ovintiv and oilfield services giant Halliburton also made the cut, both up more than 23% in the quarter to date. However, there are some stocks that often struggle when crude oil prices rise. For stocks that are negatively correlated with oil, prices would move inversely to those of the commodity. Insurance and automotive services company CCC Intelligent Solutions Holdings currently has the highest negative correlation to oil among stocks in the Russell 1000, meaning it could see a decline in the near term. The stock lost 2.5% in the quarter. Beverage giants like Molson Coors, Monster and PepsiCo are also at the top of this list, along with fast-casual restaurant chains Wingstop and Chipotle. According to a Bank of Canada working paper, this trend can be attributed in part to rising oil prices and other macroeconomic factors that can drive up real prices for corn, soybeans, wheat and rice. Molson and Monster are down 5.6% and 2.2%, respectively, in the current quarter, while PepsiCo is down more than 5%. Other names that made the list because of their inverse relationship with oil include supply chain solutions company Manhattan Associates, computer software company Cadence Design Systems and chocolate maker Hershey. Correlations don’t always hold up. Additionally, idiosyncratic drivers for any stock could play a larger role in the way it trades compared to the moves of a commodity.
https://www.cnbc.com/2023/09/06/these-stocks-could-be-the-biggest-winners-and-losers-as-oil-prices-rally-again-history-shows.html These stocks could be the biggest winners and losers if oil prices rise
