Correlation Between Magnolia Oil and East West
Can any of the company-specific risk be diversified away by investing in both Magnolia Oil and East West 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 Magnolia Oil and East West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magnolia Oil Gas and East West Petroleum, you can compare the effects of market volatilities on Magnolia Oil and East West 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 Magnolia Oil with a short position of East West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnolia Oil and East West.
Diversification Opportunities for Magnolia Oil and East West
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Magnolia and East is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and East West Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East West Petroleum and Magnolia Oil 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 Magnolia Oil Gas are associated (or correlated) with East West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East West Petroleum has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and East West go up and down completely randomly.
Pair Corralation between Magnolia Oil and East West
Considering the 90-day investment horizon Magnolia Oil is expected to generate 52.99 times less return on investment than East West. But when comparing it to its historical volatility, Magnolia Oil Gas is 13.28 times less risky than East West. It trades about 0.05 of its potential returns per unit of risk. East West Petroleum is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 2.00 in East West Petroleum on October 15, 2024 and sell it today you would earn a total of 1.00 from holding East West Petroleum or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magnolia Oil Gas vs. East West Petroleum
Performance |
| Timeline |
| Magnolia Oil Gas |
| East West Petroleum |
Magnolia Oil and East West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magnolia Oil and East West
The main advantage of trading using opposite Magnolia Oil and East West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnolia Oil position performs unexpectedly, East West 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 East West will offset losses from the drop in East West's long position.| Magnolia Oil vs. SM Energy Co | Magnolia Oil vs. Civitas Resources | Magnolia Oil vs. Range Resources Corp | Magnolia Oil vs. Matador Resources |
| East West vs. Stamper Oil Gas | East West vs. Valeura Energy | East West vs. Invictus Energy Limited | East West vs. Africa Oil Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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