Correlation Between Marathon Oil and Earthstone Energy
Can any of the company-specific risk be diversified away by investing in both Marathon Oil and Earthstone 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 Marathon Oil and Earthstone Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marathon Oil and Earthstone Energy, you can compare the effects of market volatilities on Marathon Oil and Earthstone 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 Marathon Oil with a short position of Earthstone Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marathon Oil and Earthstone Energy.
Diversification Opportunities for Marathon Oil and Earthstone Energy
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Marathon and Earthstone is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Oil and Earthstone Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Earthstone Energy and Marathon 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 Marathon Oil are associated (or correlated) with Earthstone Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Earthstone Energy has no effect on the direction of Marathon Oil i.e., Marathon Oil and Earthstone Energy go up and down completely randomly.
Pair Corralation between Marathon Oil and Earthstone Energy
Considering the 90-day investment horizon Marathon Oil is expected to generate 6.77 times less return on investment than Earthstone Energy. But when comparing it to its historical volatility, Marathon Oil is 1.49 times less risky than Earthstone Energy. It trades about 0.05 of its potential returns per unit of risk. Earthstone Energy is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,413 in Earthstone Energy on August 28, 2024 and sell it today you would earn a total of 119.00 from holding Earthstone Energy or generate 8.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.26% |
| Values | Daily Returns |
Marathon Oil vs. Earthstone Energy
Performance |
| Timeline |
| Marathon Oil |
| Earthstone Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Marathon Oil and Earthstone Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marathon Oil and Earthstone Energy
The main advantage of trading using opposite Marathon Oil and Earthstone Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marathon Oil position performs unexpectedly, Earthstone 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 Earthstone Energy will offset losses from the drop in Earthstone Energy's long position.| Marathon Oil vs. EOG Resources | Marathon Oil vs. Diamondback Energy | Marathon Oil vs. Hess Corporation | Marathon Oil vs. Devon Energy |
| Earthstone Energy vs. Vital Energy | Earthstone Energy vs. Comstock Resources | Earthstone Energy vs. Magnolia Oil Gas | Earthstone Energy vs. Obsidian 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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