Correlation Between Hess and Magnolia Oil
Can any of the company-specific risk be diversified away by investing in both Hess 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 Hess and Magnolia Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hess Corporation and Magnolia Oil Gas, you can compare the effects of market volatilities on Hess 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 Hess with a short position of Magnolia Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hess and Magnolia Oil.
Diversification Opportunities for Hess and Magnolia Oil
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hess and Magnolia is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Hess Corp. 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 Hess 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 Hess Corporation 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 Hess i.e., Hess and Magnolia Oil go up and down completely randomly.
Pair Corralation between Hess and Magnolia Oil
Considering the 90-day investment horizon Hess Corporation is expected to generate 0.75 times more return on investment than Magnolia Oil. However, Hess Corporation is 1.33 times less risky than Magnolia Oil. It trades about -0.01 of its potential returns per unit of risk. Magnolia Oil Gas is currently generating about -0.12 per unit of risk. If you would invest 14,611 in Hess Corporation on November 28, 2024 and sell it today you would lose (64.00) from holding Hess Corporation or give up 0.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hess Corp. vs. Magnolia Oil Gas
Performance |
| Timeline |
| Hess |
| Magnolia Oil Gas |
Hess and Magnolia Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hess and Magnolia Oil
The main advantage of trading using opposite Hess and Magnolia Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hess 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.The idea behind Hess Corporation and Magnolia Oil Gas 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.| Magnolia Oil vs. SM Energy Co | Magnolia Oil vs. Civitas Resources | Magnolia Oil vs. Range Resources Corp | Magnolia Oil vs. Matador 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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