Correlation Between EOG Resources and Magnolia Oil
Can any of the company-specific risk be diversified away by investing in both EOG Resources and Magnolia 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 EOG Resources and Magnolia Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EOG Resources and Magnolia Oil Gas, you can compare the effects of market volatilities on EOG Resources and Magnolia 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 EOG Resources with a short position of Magnolia Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of EOG Resources and Magnolia Oil.
Diversification Opportunities for EOG Resources and Magnolia Oil
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between EOG and Magnolia is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and Magnolia Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnolia Oil Gas and EOG Resources 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 EOG Resources are associated (or correlated) with Magnolia Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnolia Oil Gas has no effect on the direction of EOG Resources i.e., EOG Resources and Magnolia Oil go up and down completely randomly.
Pair Corralation between EOG Resources and Magnolia Oil
Considering the 90-day investment horizon EOG Resources is expected to generate 1.3 times less return on investment than Magnolia Oil. But when comparing it to its historical volatility, EOG Resources is 1.04 times less risky than Magnolia Oil. It trades about 0.2 of its potential returns per unit of risk. Magnolia Oil Gas is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 2,545 in Magnolia Oil Gas on August 28, 2024 and sell it today you would earn a total of 274.00 from holding Magnolia Oil Gas or generate 10.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
EOG Resources vs. Magnolia Oil Gas
Performance |
| Timeline |
| EOG Resources |
| Magnolia Oil Gas |
EOG Resources and Magnolia Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EOG Resources and Magnolia Oil
The main advantage of trading using opposite EOG Resources and Magnolia Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EOG Resources position performs unexpectedly, Magnolia 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 Magnolia Oil will offset losses from the drop in Magnolia Oil's long position.| EOG Resources vs. Permian Resources | EOG Resources vs. Devon Energy | EOG Resources vs. Coterra Energy | EOG Resources vs. Marathon Oil |
| Magnolia Oil vs. Devon Energy | Magnolia Oil vs. ConocoPhillips | Magnolia Oil vs. Occidental Petroleum | Magnolia Oil vs. Permian Resources |
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 Correlations module to find global opportunities by holding instruments from different markets.
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