Correlation Between Earthstone Energy and Marathon Oil
Can any of the company-specific risk be diversified away by investing in both Earthstone Energy 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 Earthstone Energy and Marathon Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Earthstone Energy and Marathon Oil, you can compare the effects of market volatilities on Earthstone Energy 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 Earthstone Energy with a short position of Marathon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Earthstone Energy and Marathon Oil.
Diversification Opportunities for Earthstone Energy and Marathon Oil
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Earthstone and Marathon is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Earthstone Energy and Marathon Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Oil and Earthstone Energy 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 Earthstone Energy 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 Earthstone Energy i.e., Earthstone Energy and Marathon Oil go up and down completely randomly.
Pair Corralation between Earthstone Energy and Marathon Oil
Given the investment horizon of 90 days Earthstone Energy is expected to generate 1.49 times more return on investment than Marathon Oil. However, Earthstone Energy is 1.49 times more volatile than Marathon Oil. It trades about 0.22 of its potential returns per unit of risk. Marathon Oil is currently generating about 0.05 per unit of risk. If you would invest 1,413 in Earthstone Energy on August 28, 2024 and sell it today you would earn a total of 119.00 from holding Earthstone Energy or generate 8.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.26% |
| Values | Daily Returns |
Earthstone Energy vs. Marathon Oil
Performance |
| Timeline |
| Earthstone Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Marathon Oil |
Earthstone Energy and Marathon Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Earthstone Energy and Marathon Oil
The main advantage of trading using opposite Earthstone Energy and Marathon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Earthstone Energy 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.| Earthstone Energy vs. Vital Energy | Earthstone Energy vs. Comstock Resources | Earthstone Energy vs. Magnolia Oil Gas | Earthstone Energy vs. Obsidian Energy |
| Marathon Oil vs. EOG Resources | Marathon Oil vs. Diamondback Energy | Marathon Oil vs. Hess Corporation | Marathon Oil vs. Devon Energy |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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