Correlation Between Diamondback Energy and Magnolia Oil
Can any of the company-specific risk be diversified away by investing in both Diamondback Energy 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 Diamondback Energy and Magnolia Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamondback Energy and Magnolia Oil Gas, you can compare the effects of market volatilities on Diamondback Energy 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 Diamondback Energy with a short position of Magnolia Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamondback Energy and Magnolia Oil.
Diversification Opportunities for Diamondback Energy and Magnolia Oil
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Diamondback and Magnolia is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Diamondback Energy 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 Diamondback 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 Diamondback Energy 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 Diamondback Energy i.e., Diamondback Energy and Magnolia Oil go up and down completely randomly.
Pair Corralation between Diamondback Energy and Magnolia Oil
Given the investment horizon of 90 days Diamondback Energy is expected to generate 6.6 times less return on investment than Magnolia Oil. But when comparing it to its historical volatility, Diamondback Energy is 1.07 times less risky than Magnolia Oil. It trades about 0.04 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamondback Energy vs. Magnolia Oil Gas
Performance |
| Timeline |
| Diamondback Energy |
| Magnolia Oil Gas |
Diamondback Energy and Magnolia Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamondback Energy and Magnolia Oil
The main advantage of trading using opposite Diamondback Energy and Magnolia Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamondback Energy 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.| Diamondback Energy vs. Devon Energy | Diamondback Energy vs. Coterra Energy | Diamondback Energy vs. EOG Resources | Diamondback Energy vs. ConocoPhillips |
| 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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