Correlation Between Magnolia Oil and Berry Petroleum

Can any of the company-specific risk be diversified away by investing in both Magnolia Oil and Berry Petroleum 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 Berry Petroleum 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 Berry Petroleum Corp, you can compare the effects of market volatilities on Magnolia Oil and Berry Petroleum 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 Berry Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnolia Oil and Berry Petroleum.

Diversification Opportunities for Magnolia Oil and Berry Petroleum

0.19

Correlation Coefficient

Magnolia Oil  Berry Petroleum

Average diversification

The 3 months correlation between Magnolia and Berry is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and Berry Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berry Petroleum Corp 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 Berry Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berry Petroleum Corp has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and Berry Petroleum go up and down completely randomly.

Pair Corralation between Magnolia Oil and Berry Petroleum

Considering the 90-day investment horizon Magnolia Oil Gas is expected to under-perform the Berry Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, Magnolia Oil Gas is 1.44 times less risky than Berry Petroleum. The stock trades about -0.14 of its potential returns per unit of risk. The Berry Petroleum Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  408.00  in Berry Petroleum Corp on November 29, 2024 and sell it today you would earn a total of  6.00  from holding Berry Petroleum Corp or generate 1.47% return on investment over 90 days.

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

Magnolia Oil Gas  vs.  Berry Petroleum Corp

Magnolia Oil Gas

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Berry Petroleum Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Berry Petroleum Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Berry Petroleum is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Magnolia Oil and Berry Petroleum

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

The idea behind Magnolia Oil Gas and Berry Petroleum Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.