Correlation Between Cabot Oil and Marathon Oil
Can any of the company-specific risk be diversified away by investing in both Cabot Oil and Marathon Oil at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cabot Oil and Marathon Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cabot Oil Gas and Marathon Oil, you can compare the effects of market volatilities on Cabot Oil and Marathon Oil and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cabot Oil with a short position of Marathon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabot Oil and Marathon Oil.
Diversification Opportunities for Cabot Oil and Marathon Oil
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cabot and Marathon is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cabot Oil Gas and Marathon Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Oil and Cabot Oil is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cabot Oil Gas are associated (or correlated) with Marathon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Oil has no effect on the direction of Cabot Oil i.e., Cabot Oil and Marathon Oil go up and down completely randomly.
Pair Corralation between Cabot Oil and Marathon Oil
Assuming the 90 days trading horizon Cabot Oil is expected to generate 1.69 times less return on investment than Marathon Oil. But when comparing it to its historical volatility, Cabot Oil Gas is 1.25 times less risky than Marathon Oil. It trades about 0.05 of its potential returns per unit of risk. Marathon Oil is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 41,207 in Marathon Oil on September 12, 2024 and sell it today you would earn a total of 15,193 from holding Marathon Oil or generate 36.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.87% |
| Values | Daily Returns |
Cabot Oil Gas vs. Marathon Oil
Performance |
| Timeline |
| Cabot Oil Gas |
| Marathon Oil |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cabot Oil and Marathon Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cabot Oil and Marathon Oil
The main advantage of trading using opposite Cabot Oil and Marathon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabot Oil position performs unexpectedly, Marathon Oil can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Marathon Oil will offset losses from the drop in Marathon Oil's long position.The idea behind Cabot Oil Gas and Marathon Oil pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Marathon Oil vs. ConocoPhillips | Marathon Oil vs. Devon Energy | Marathon Oil vs. Cabot Oil Gas | Marathon Oil vs. APA Corporation |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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