Correlation Between Magnolia Oil and Black Stone

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

Diversification Opportunities for Magnolia Oil and Black Stone

0.46

Correlation Coefficient

Magnolia Oil  Black Stone

Very weak diversification

The 3 months correlation between Magnolia and Black is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and Black Stone Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Stone Minerals 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 Black Stone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Stone Minerals has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and Black Stone go up and down completely randomly.

Pair Corralation between Magnolia Oil and Black Stone

Considering the 90-day investment horizon Magnolia Oil Gas is expected to generate 1.6 times more return on investment than Black Stone. However, Magnolia Oil is 1.6 times more volatile than Black Stone Minerals. It trades about 0.1 of its potential returns per unit of risk. Black Stone Minerals is currently generating about 0.12 per unit of risk. If you would invest  2,310  in Magnolia Oil Gas on December 28, 2024 and sell it today you would earn a total of  250.00  from holding Magnolia Oil Gas or generate 10.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Magnolia Oil Gas  vs.  Black Stone Minerals

Magnolia Oil Gas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnolia Oil Gas are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Magnolia Oil may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Black Stone Minerals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Black Stone Minerals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Black Stone may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Magnolia Oil and Black Stone

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

The idea behind Magnolia Oil Gas and Black Stone Minerals 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.