Correlation Between Magnolia Oil and WT Offshore
Can any of the company-specific risk be diversified away by investing in both Magnolia Oil and WT Offshore 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 WT Offshore 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 WT Offshore, you can compare the effects of market volatilities on Magnolia Oil and WT Offshore 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 WT Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnolia Oil and WT Offshore.
Diversification Opportunities for Magnolia Oil and WT Offshore
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Magnolia and WTI is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and WT Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT Offshore 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 WT Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WT Offshore has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and WT Offshore go up and down completely randomly.
Pair Corralation between Magnolia Oil and WT Offshore
Considering the 90-day investment horizon Magnolia Oil Gas is expected to generate 0.55 times more return on investment than WT Offshore. However, Magnolia Oil Gas is 1.81 times less risky than WT Offshore. It trades about 0.02 of its potential returns per unit of risk. WT Offshore is currently generating about -0.21 per unit of risk. If you would invest 2,360 in Magnolia Oil Gas on November 3, 2024 and sell it today you would earn a total of 10.00 from holding Magnolia Oil Gas or generate 0.42% 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. WT Offshore
Performance |
| Timeline |
| Magnolia Oil Gas |
| WT Offshore |
Magnolia Oil and WT Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magnolia Oil and WT Offshore
The main advantage of trading using opposite Magnolia Oil and WT Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnolia Oil position performs unexpectedly, WT Offshore 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 WT Offshore will offset losses from the drop in WT Offshore'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 |
| WT Offshore vs. Evolution Petroleum | WT Offshore vs. Ring Energy | WT Offshore vs. Gran Tierra Energy | WT Offshore vs. Permian Resources |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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