Correlation Between Magnolia Oil and Crescent Energy

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

Diversification Opportunities for Magnolia Oil and Crescent Energy

0.43

Correlation Coefficient

Magnolia Oil  Crescent Energy

Very weak diversification

The 3 months correlation between Magnolia and Crescent is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and Crescent Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Energy 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 Crescent Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Energy has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and Crescent Energy go up and down completely randomly.

Pair Corralation between Magnolia Oil and Crescent Energy

Considering the 90-day investment horizon Magnolia Oil Gas is expected to generate 0.8 times more return on investment than Crescent Energy. However, Magnolia Oil Gas is 1.24 times less risky than Crescent Energy. It trades about -0.13 of its potential returns per unit of risk. Crescent Energy Co is currently generating about -0.11 per unit of risk. If you would invest  2,719  in Magnolia Oil Gas on December 1, 2024 and sell it today you would lose (378.00) from holding Magnolia Oil Gas or give up 13.9% of portfolio value over 90 days.

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

Magnolia Oil Gas  vs.  Crescent Energy Co

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Crescent Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Crescent Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Magnolia Oil and Crescent Energy

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

The idea behind Magnolia Oil Gas and Crescent Energy Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.