Correlation Between Invictus Energy and Magnolia Oil

Can any of the company-specific risk be diversified away by investing in both Invictus 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 Invictus 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 Invictus Energy Limited and Magnolia Oil Gas, you can compare the effects of market volatilities on Invictus 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 Invictus Energy with a short position of Magnolia Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invictus Energy and Magnolia Oil.

Diversification Opportunities for Invictus Energy and Magnolia Oil

0.01

Correlation Coefficient

Invictus Energy  Magnolia Oil

Significant diversification

The 3 months correlation between Invictus and Magnolia is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Invictus Energy Limited 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 Invictus 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 Invictus Energy Limited 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 Invictus Energy i.e., Invictus Energy and Magnolia Oil go up and down completely randomly.

Pair Corralation between Invictus Energy and Magnolia Oil

Assuming the 90 days horizon Invictus Energy Limited is expected to generate 4.1 times more return on investment than Magnolia Oil. However, Invictus Energy is 4.1 times more volatile than Magnolia Oil Gas. It trades about 0.02 of its potential returns per unit of risk. Magnolia Oil Gas is currently generating about 0.01 per unit of risk. If you would invest  11.00  in Invictus Energy Limited on October 4, 2024 and sell it today you would lose (6.90) from holding Invictus Energy Limited or give up 62.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Invictus Energy Limited  vs.  Magnolia Oil Gas

Invictus Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invictus Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Invictus Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Magnolia Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magnolia Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Invictus Energy and Magnolia Oil

The main advantage of trading using opposite Invictus Energy and Magnolia Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invictus 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.

The idea behind Invictus Energy Limited and Magnolia Oil Gas 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.