Correlation Between Magnolia Oil and West Canyon

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

Diversification Opportunities for Magnolia Oil and West Canyon

-0.29

Correlation Coefficient

Magnolia Oil  West Canyon

Very good diversification

The 3 months correlation between Magnolia and West is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and West Canyon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Canyon 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 West Canyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Canyon Energy has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and West Canyon go up and down completely randomly.

Pair Corralation between Magnolia Oil and West Canyon

If you would invest  2,299  in Magnolia Oil Gas on December 19, 2024 and sell it today you would earn a total of  105.00  from holding Magnolia Oil Gas or generate 4.57% return on investment over 90 days.

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

Magnolia Oil Gas  vs.  West Canyon Energy

Magnolia Oil Gas

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magnolia Oil Gas are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Magnolia Oil is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

West Canyon Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days West Canyon Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, West Canyon is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Magnolia Oil and West Canyon

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

The idea behind Magnolia Oil Gas and West Canyon 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.