Correlation Between Magnolia Oil and Diamondback Energy
Can any of the company-specific risk be diversified away by investing in both Magnolia Oil and Diamondback Energy 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 Diamondback Energy 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 Diamondback Energy, you can compare the effects of market volatilities on Magnolia Oil and Diamondback Energy 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 Diamondback Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnolia Oil and Diamondback Energy.
Diversification Opportunities for Magnolia Oil and Diamondback Energy
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Magnolia and Diamondback is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and Diamondback Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondback Energy 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 Diamondback Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondback Energy has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and Diamondback Energy go up and down completely randomly.
Pair Corralation between Magnolia Oil and Diamondback Energy
Considering the 90-day investment horizon Magnolia Oil Gas is expected to generate 1.12 times more return on investment than Diamondback Energy. However, Magnolia Oil is 1.12 times more volatile than Diamondback Energy. It trades about -0.03 of its potential returns per unit of risk. Diamondback Energy is currently generating about -0.14 per unit of risk. If you would invest 2,397 in Magnolia Oil Gas on November 4, 2024 and sell it today you would lose (27.00) from holding Magnolia Oil Gas or give up 1.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magnolia Oil Gas vs. Diamondback Energy
Performance |
| Timeline |
| Magnolia Oil Gas |
| Diamondback Energy |
Magnolia Oil and Diamondback Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magnolia Oil and Diamondback Energy
The main advantage of trading using opposite Magnolia Oil and Diamondback Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnolia Oil position performs unexpectedly, Diamondback Energy 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 Diamondback Energy will offset losses from the drop in Diamondback Energy'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 |
| Diamondback Energy vs. Devon Energy | Diamondback Energy vs. Coterra Energy | Diamondback Energy vs. EOG Resources | Diamondback Energy vs. ConocoPhillips |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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