Correlation Between Magnolia Oil and Riley Exploration
Can any of the company-specific risk be diversified away by investing in both Magnolia Oil and Riley Exploration 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 Riley Exploration 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 Riley Exploration Permian, you can compare the effects of market volatilities on Magnolia Oil and Riley Exploration 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 Riley Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnolia Oil and Riley Exploration.
Diversification Opportunities for Magnolia Oil and Riley Exploration
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Magnolia and Riley is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and Riley Exploration Permian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riley Exploration Permian 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 Riley Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riley Exploration Permian has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and Riley Exploration go up and down completely randomly.
Pair Corralation between Magnolia Oil and Riley Exploration
Considering the 90-day investment horizon Magnolia Oil is expected to generate 2.15 times less return on investment than Riley Exploration. But when comparing it to its historical volatility, Magnolia Oil Gas is 1.22 times less risky than Riley Exploration. It trades about 0.1 of its potential returns per unit of risk. Riley Exploration Permian is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,830 in Riley Exploration Permian on August 25, 2024 and sell it today you would earn a total of 858.00 from holding Riley Exploration Permian or generate 30.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.46% |
| Values | Daily Returns |
Magnolia Oil Gas vs. Riley Exploration Permian
Performance |
| Timeline |
| Magnolia Oil Gas |
| Riley Exploration Permian |
Magnolia Oil and Riley Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magnolia Oil and Riley Exploration
The main advantage of trading using opposite Magnolia Oil and Riley Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnolia Oil position performs unexpectedly, Riley Exploration 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 Riley Exploration will offset losses from the drop in Riley Exploration'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 |
| Riley Exploration vs. Vital Energy | Riley Exploration vs. Permian Resources | Riley Exploration vs. Magnolia Oil Gas | Riley Exploration vs. Ring Energy |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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