Correlation Between Magnolia Oil and VOC Energy

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

Diversification Opportunities for Magnolia Oil and VOC Energy

0.57

Correlation Coefficient

Magnolia Oil  VOC Energy

Very weak diversification

The 3 months correlation between Magnolia and VOC is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and VOC Energy Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VOC Energy Trust 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 VOC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VOC Energy Trust has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and VOC Energy go up and down completely randomly.

Pair Corralation between Magnolia Oil and VOC Energy

Considering the 90-day investment horizon Magnolia Oil Gas is expected to generate 0.98 times more return on investment than VOC Energy. However, Magnolia Oil Gas is 1.02 times less risky than VOC Energy. It trades about 0.12 of its potential returns per unit of risk. VOC Energy Trust is currently generating about 0.06 per unit of risk. If you would invest  2,419  in Magnolia Oil Gas on August 31, 2024 and sell it today you would earn a total of  355.00  from holding Magnolia Oil Gas or generate 14.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Magnolia Oil Gas  vs.  VOC Energy Trust

Magnolia Oil Gas

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnolia Oil Gas are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Magnolia Oil showed solid returns over the last few months and may actually be approaching a breakup point.

VOC Energy Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VOC Energy Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, VOC Energy may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Magnolia Oil and VOC Energy

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

The idea behind Magnolia Oil Gas and VOC Energy Trust 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.