Correlation Between Marathon Oil and Range Resources

Can any of the company-specific risk be diversified away by investing in both Marathon Oil and Range Resources 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 Marathon Oil and Range Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Marathon Oil and Range Resources Corp, you can compare the effects of market volatilities on Marathon Oil and Range Resources 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 Marathon Oil with a short position of Range Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marathon Oil and Range Resources.

Diversification Opportunities for Marathon Oil and Range Resources

0.43

Correlation Coefficient

Marathon Oil  Range Resources

Very weak diversification

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

Pair Corralation between Marathon Oil and Range Resources

If you would invest  3,314  in Range Resources Corp on October 20, 2024 and sell it today you would earn a total of  793.00  from holding Range Resources Corp or generate 23.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	5.0%
Values	Daily Returns

Marathon Oil  vs.  Range Resources Corp

Marathon Oil

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Marathon Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very fragile basic indicators, Marathon Oil displayed solid returns over the last few months and may actually be approaching a breakup point.

Range Resources Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Range Resources Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Range Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marathon Oil and Range Resources

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

The idea behind Marathon Oil and Range Resources Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.