Correlation Between Magnolia Oil and Stamper Oil

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

Diversification Opportunities for Magnolia Oil and Stamper Oil

0.24

Correlation Coefficient

Magnolia Oil  Stamper Oil

Modest diversification

The 3 months correlation between Magnolia and Stamper is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and Stamper Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stamper Oil Gas 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 Stamper Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stamper Oil Gas has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and Stamper Oil go up and down completely randomly.

Pair Corralation between Magnolia Oil and Stamper Oil

Considering the 90-day investment horizon Magnolia Oil is expected to generate 174.3 times less return on investment than Stamper Oil. But when comparing it to its historical volatility, Magnolia Oil Gas is 31.31 times less risky than Stamper Oil. It trades about 0.01 of its potential returns per unit of risk. Stamper Oil Gas is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Stamper Oil Gas on October 4, 2024 and sell it today you would lose (22.00) from holding Stamper Oil Gas or give up 95.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Magnolia Oil Gas  vs.  Stamper Oil Gas

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.

Stamper Oil Gas

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stamper Oil Gas are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Stamper Oil reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magnolia Oil and Stamper Oil

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

The idea behind Magnolia Oil Gas and Stamper Oil Gas 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.