Correlation Between Select Energy and Magnolia Oil
Can any of the company-specific risk be diversified away by investing in both Select Energy and Magnolia Oil 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 Select Energy and Magnolia Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select Energy Services and Magnolia Oil Gas, you can compare the effects of market volatilities on Select Energy and Magnolia Oil 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 Select Energy with a short position of Magnolia Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Energy and Magnolia Oil.
Diversification Opportunities for Select Energy and Magnolia Oil
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Select and Magnolia is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Select Energy Services and Magnolia Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnolia Oil Gas and Select Energy 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 Select Energy Services are associated (or correlated) with Magnolia Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnolia Oil Gas has no effect on the direction of Select Energy i.e., Select Energy and Magnolia Oil go up and down completely randomly.
Pair Corralation between Select Energy and Magnolia Oil
Given the investment horizon of 90 days Select Energy Services is expected to generate 2.9 times more return on investment than Magnolia Oil. However, Select Energy is 2.9 times more volatile than Magnolia Oil Gas. It trades about 0.26 of its potential returns per unit of risk. Magnolia Oil Gas is currently generating about 0.22 per unit of risk. If you would invest 1,072 in Select Energy Services on August 28, 2024 and sell it today you would earn a total of 374.00 from holding Select Energy Services or generate 34.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select Energy Services vs. Magnolia Oil Gas
Performance |
| Timeline |
| Select Energy Services |
| Magnolia Oil Gas |
Select Energy and Magnolia Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Energy and Magnolia Oil
The main advantage of trading using opposite Select Energy and Magnolia Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Energy position performs unexpectedly, Magnolia Oil 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 Magnolia Oil will offset losses from the drop in Magnolia Oil's long position.| Select Energy vs. ProPetro Holding Corp | Select Energy vs. RPC Inc | Select Energy vs. MRC Global | Select Energy vs. Expro Group Holdings |
| Magnolia Oil vs. SM Energy Co | Magnolia Oil vs. Civitas Resources | Magnolia Oil vs. Range Resources Corp | Magnolia Oil vs. Matador 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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