Correlation Between Magnolia Oil and Questerre Energy

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

Diversification Opportunities for Magnolia Oil and Questerre Energy

0.27

Correlation Coefficient

Magnolia Oil  Questerre Energy

Modest diversification

The 3 months correlation between Magnolia and Questerre is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and Questerre Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Questerre 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 Questerre Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Questerre Energy has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and Questerre Energy go up and down completely randomly.

Pair Corralation between Magnolia Oil and Questerre Energy

Considering the 90-day investment horizon Magnolia Oil Gas is expected to generate 1.15 times more return on investment than Questerre Energy. However, Magnolia Oil is 1.15 times more volatile than Questerre Energy. It trades about -0.16 of its potential returns per unit of risk. Questerre Energy is currently generating about -0.22 per unit of risk. If you would invest  2,560  in Magnolia Oil Gas on October 11, 2024 and sell it today you would lose (132.00) from holding Magnolia Oil Gas or give up 5.16% 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.  Questerre Energy

Magnolia Oil Gas

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Questerre Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Questerre Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Magnolia Oil and Questerre Energy

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

The idea behind Magnolia Oil Gas and Questerre Energy 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.