Correlation Between Magnolia Oil and Petróleo Brasileiro
Can any of the company-specific risk be diversified away by investing in both Magnolia Oil and Petróleo Brasileiro 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 Petróleo Brasileiro 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 Petrleo Brasileiro SA, you can compare the effects of market volatilities on Magnolia Oil and Petróleo Brasileiro 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 Petróleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnolia Oil and Petróleo Brasileiro.
Diversification Opportunities for Magnolia Oil and Petróleo Brasileiro
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Magnolia and Petróleo is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and Petrleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petróleo Brasileiro 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 Petróleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petróleo Brasileiro has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and Petróleo Brasileiro go up and down completely randomly.
Pair Corralation between Magnolia Oil and Petróleo Brasileiro
Considering the 90-day investment horizon Magnolia Oil Gas is expected to generate 0.92 times more return on investment than Petróleo Brasileiro. However, Magnolia Oil Gas is 1.09 times less risky than Petróleo Brasileiro. It trades about 0.06 of its potential returns per unit of risk. Petrleo Brasileiro SA is currently generating about 0.05 per unit of risk. If you would invest 2,035 in Magnolia Oil Gas on August 31, 2024 and sell it today you would earn a total of 739.00 from holding Magnolia Oil Gas or generate 36.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magnolia Oil Gas vs. Petrleo Brasileiro SA
Performance |
| Timeline |
| Magnolia Oil Gas |
| Petróleo Brasileiro |
Magnolia Oil and Petróleo Brasileiro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magnolia Oil and Petróleo Brasileiro
The main advantage of trading using opposite Magnolia Oil and Petróleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnolia Oil position performs unexpectedly, Petróleo Brasileiro 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 Petróleo Brasileiro will offset losses from the drop in Petróleo Brasileiro'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 |
| Petróleo Brasileiro vs. Petroleo Brasileiro Petrobras | Petróleo Brasileiro vs. Equinor ASA ADR | Petróleo Brasileiro vs. Eni SpA ADR | Petróleo Brasileiro vs. YPF Sociedad Anonima |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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