Correlation Between Magnolia Oil and Calumet Specialty

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

Diversification Opportunities for Magnolia Oil and Calumet Specialty

0.7

Correlation Coefficient

Magnolia Oil  Calumet Specialty

Poor diversification

The 3 months correlation between Magnolia and Calumet is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and Calumet Specialty Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calumet Specialty 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 Calumet Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calumet Specialty has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and Calumet Specialty go up and down completely randomly.

Pair Corralation between Magnolia Oil and Calumet Specialty

Considering the 90-day investment horizon Magnolia Oil is expected to generate 2.9 times less return on investment than Calumet Specialty. But when comparing it to its historical volatility, Magnolia Oil Gas is 1.55 times less risky than Calumet Specialty. It trades about 0.06 of its potential returns per unit of risk. Calumet Specialty Products is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,796  in Calumet Specialty Products on September 14, 2024 and sell it today you would earn a total of  387.00  from holding Calumet Specialty Products or generate 21.55% return on investment over 90 days.

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

Magnolia Oil Gas  vs.  Calumet Specialty Products

Magnolia Oil Gas

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magnolia Oil Gas are ranked lower than 4 (%) 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 January 2025.

Calumet Specialty

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Calumet Specialty Products are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal primary indicators, Calumet Specialty unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magnolia Oil and Calumet Specialty

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

The idea behind Magnolia Oil Gas and Calumet Specialty Products 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.