Correlation Between Magnolia Oil and CKX Lands

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

Diversification Opportunities for Magnolia Oil and CKX Lands

0.3

Correlation Coefficient

Magnolia Oil  CKX Lands

Weak diversification

The 3 months correlation between Magnolia and CKX is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and CKX Lands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CKX Lands 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 CKX Lands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CKX Lands has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and CKX Lands go up and down completely randomly.

Pair Corralation between Magnolia Oil and CKX Lands

Considering the 90-day investment horizon Magnolia Oil Gas is expected to under-perform the CKX Lands. In addition to that, Magnolia Oil is 1.1 times more volatile than CKX Lands. It trades about -0.15 of its total potential returns per unit of risk. CKX Lands is currently generating about -0.06 per unit of volatility. If you would invest  1,220  in CKX Lands on November 28, 2024 and sell it today you would lose (77.00) from holding CKX Lands or give up 6.31% of portfolio value over 90 days.

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

Magnolia Oil Gas  vs.  CKX Lands

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.

CKX Lands

Risk-Adjusted Performance

Very Weak

Over the last 90 days CKX Lands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, CKX Lands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Magnolia Oil and CKX Lands

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

The idea behind Magnolia Oil Gas and CKX Lands 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.