Correlation Between Magnolia Oil and ProPetro Holding
Can any of the company-specific risk be diversified away by investing in both Magnolia Oil and ProPetro Holding 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 ProPetro Holding 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 ProPetro Holding Corp, you can compare the effects of market volatilities on Magnolia Oil and ProPetro Holding 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 ProPetro Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnolia Oil and ProPetro Holding.
Diversification Opportunities for Magnolia Oil and ProPetro Holding
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Magnolia and ProPetro is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and ProPetro Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProPetro Holding Corp 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 ProPetro Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProPetro Holding Corp has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and ProPetro Holding go up and down completely randomly.
Pair Corralation between Magnolia Oil and ProPetro Holding
Considering the 90-day investment horizon Magnolia Oil is expected to generate 1.34 times less return on investment than ProPetro Holding. But when comparing it to its historical volatility, Magnolia Oil Gas is 2.47 times less risky than ProPetro Holding. It trades about 0.22 of its potential returns per unit of risk. ProPetro Holding Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 756.00 in ProPetro Holding Corp on August 28, 2024 and sell it today you would earn a total of 85.00 from holding ProPetro Holding Corp or generate 11.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magnolia Oil Gas vs. ProPetro Holding Corp
Performance |
| Timeline |
| Magnolia Oil Gas |
| ProPetro Holding Corp |
Magnolia Oil and ProPetro Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magnolia Oil and ProPetro Holding
The main advantage of trading using opposite Magnolia Oil and ProPetro Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnolia Oil position performs unexpectedly, ProPetro Holding 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 ProPetro Holding will offset losses from the drop in ProPetro Holding'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 |
| ProPetro Holding vs. Ranger Energy Services | ProPetro Holding vs. Newpark Resources | ProPetro Holding vs. RPC Inc | ProPetro Holding vs. Archrock |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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