What Could Possibly Fuel Anadarko Petroleum in 2016?
Anadarko’s stock performance
In this final part of our series on Anadarko Petroleum (APC), we’ll compare the company’s stock movements to movements in the broader market, to crude oil and natural gas prices, and to the USDX (US dollar index).
As we saw in Part 1 of this series, Anadarko’s stock has fallen nearly 45% YoY (year-over-year). However, recently, the stock has been on an uptrend, mirroring crude oil price movements.
Many upstream companies such as Chesapeake Energy (CHK), Hess (HES), and Apache (APA) have taken hits due to weak commodity prices. These particular stocks have declined by 71%, 25%, and 20%, respectively, YoY. Notably, these companies together make up ~10% of the iShares US Oil & Gas Exploration & Production ETF (IEO).
The correlation coefficient
The correlation coefficient between APC’s stock price and crude oil prices (USO) from March 2015 to the present (March 29, 2016) is about 0.6. This indicates a strong degree of correlation between crude oil prices and Anadarko’s stock prices. In the same period, the correlation coefficient between APC and natural gas prices (UNG) is 0.2. This indicates a positive but substantially lower correlation between the two.
We should also note that APC’s stock has given lower returns compared to WTI’s and natural gas’s YoY returns. When compared to the broader market S&P 500 ETF (SPY), APC has underperformed, and as we can see in the graph, APC has been negatively correlated to USDX. Since March 2015, USDX has returned ~9%.
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