Correlation Between Berry Petroleum and Marathon Oil

Can any of the company-specific risk be diversified away by investing in both Berry Petroleum and Marathon 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 Berry Petroleum and Marathon Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Berry Petroleum Corp and Marathon Oil, you can compare the effects of market volatilities on Berry Petroleum and Marathon 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 Berry Petroleum with a short position of Marathon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berry Petroleum and Marathon Oil.

Diversification Opportunities for Berry Petroleum and Marathon Oil

-0.4

Correlation Coefficient

Berry Petroleum  Marathon Oil

Very good diversification

The 3 months correlation between Berry and Marathon is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Berry Petroleum Corp and Marathon Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Oil and Berry Petroleum 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 Berry Petroleum Corp are associated (or correlated) with Marathon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Oil has no effect on the direction of Berry Petroleum i.e., Berry Petroleum and Marathon Oil go up and down completely randomly.

Pair Corralation between Berry Petroleum and Marathon Oil

Considering the 90-day investment horizon Berry Petroleum Corp is expected to under-perform the Marathon Oil. In addition to that, Berry Petroleum is 1.61 times more volatile than Marathon Oil. It trades about -0.19 of its total potential returns per unit of risk. Marathon Oil is currently generating about 0.04 per unit of volatility. If you would invest  2,760  in Marathon Oil on September 2, 2024 and sell it today you would earn a total of  95.00  from holding Marathon Oil or generate 3.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.19%
Values	Daily Returns

Berry Petroleum Corp  vs.  Marathon Oil

Berry Petroleum Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Berry Petroleum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Marathon Oil

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marathon Oil are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Marathon Oil is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Berry Petroleum and Marathon Oil

The main advantage of trading using opposite Berry Petroleum and Marathon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berry Petroleum position performs unexpectedly, Marathon 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 Marathon Oil will offset losses from the drop in Marathon Oil's long position.

The idea behind Berry Petroleum Corp and Marathon Oil pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.