Over the past year, Occidental Petroleum shares have moved in the opposite direction of the broader market, providing a counterbalance to portfolio risks rather than amplifying them. This recent inverse correlation stands in contrast to the stock's historical behavior, where it mostly moved in tandem with the S&P 500 over the prior five years.
The shift in trading patterns began in March 2026. During this period, the S&P 500 gained an average of 0.65% on positive days, while a $10,000 holding in Occidental lost approximately $30. Conversely, on average negative days when the index fell 0.6%, the same Occidental holding gained about $67. This dynamic means that for every 1% change in the index, Occidental moved roughly 0.63% in the opposite direction.
Despite this offsetting effect, Occidental remains a volatile asset. Its annualized volatility over the past twelve months was 35.3%, significantly higher than the S&P 500's 13.0%. The stock fell on each of the index's three worst days during the year. On the worst day for the S&P 500, which declined 2.7%, Occidental shares dropped 5.3%.
Long-term returns have not fully compensated investors for these larger swings. Over the past five years, Occidental returned 15.6% annually, slightly outpacing the S&P 500's 14.1% return. However, the stock's volatility over that same period was 37.9% annually compared to 17.1% for the index. When return is divided by volatility, Occidental generated a score of 0.41, whereas the S&P 500 achieved 0.82, indicating that Occidental's price swings have paid about half as well as the broader market.
Occidental's performance remains tightly linked to commodity prices, as oil and gas production accounted for $20.9 billion of its $21.6 billion in fiscal 2025 revenue. During its fiscal Q2 2026 earnings call on August 6, 2026, management noted that higher commodity prices supported free cash flow. The company described the situation in the Middle East as fluid and maintained its goal of reducing principal debt to $10 billion, though it declined to set a further target due to volatile oil prices.
Management has already reduced principal debt to $11.8 billion, the lowest level since the second quarter of 2019. For investors, Occidental may provide a minor lift when markets fall and a drag when they rise, but this benefit is limited if oil and gas are already a large component of their holdings. Adding Occidental to a portfolio that already includes other energy producers or funds simply increases exposure to oil and gas prices.