Correlation Between Basic Materials and Marathon Oil
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Marathon Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Marathon Oil, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Marathon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Marathon Oil.
Diversification Opportunities for Basic Materials and Marathon Oil
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Basic and Marathon is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Marathon Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Oil and Basic Materials 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 Basic Materials 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 Basic Materials i.e., Basic Materials and Marathon Oil go up and down completely randomly.
Pair Corralation between Basic Materials and Marathon Oil
Assuming the 90 days trading horizon Basic Materials is expected to generate 3.96 times less return on investment than Marathon Oil. In addition to that, Basic Materials is 1.07 times more volatile than Marathon Oil. It trades about 0.1 of its total potential returns per unit of risk. Marathon Oil is currently generating about 0.43 per unit of volatility. If you would invest 16,008 in Marathon Oil on September 1, 2024 and sell it today you would earn a total of 1,007 from holding Marathon Oil or generate 6.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 71.43% |
| Values | Daily Returns |
Basic Materials vs. Marathon Oil
Performance |
| Timeline |
Basic Materials and Marathon Oil Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Marathon Oil
Pair trading matchups for Marathon Oil
Pair Trading with Basic Materials and Marathon Oil
The main advantage of trading using opposite Basic Materials and Marathon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. GP Investments | Basic Materials vs. TAL Education Group | Basic Materials vs. Deutsche Bank Aktiengesellschaft | Basic Materials vs. STMicroelectronics NV |
| Marathon Oil vs. Petro Rio SA | Marathon Oil vs. Banco BTG Pactual | Marathon Oil vs. Ambipar Participaes e | Marathon Oil vs. Mliuz SA |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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