Correlation Between New Frontier and Magnolia Oil

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

By analyzing existing cross correlation between New Frontier Energy and Magnolia Oil Gas, you can compare the effects of market volatilities on New Frontier and Magnolia 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 New Frontier with a short position of Magnolia Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Frontier and Magnolia Oil.

Diversification Opportunities for New Frontier and Magnolia Oil

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Correlation Coefficient

New Frontier  Magnolia Oil

Pay attention - limited upside

The 3 months correlation between New and Magnolia is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding New Frontier Energy and Magnolia Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnolia Oil Gas and New Frontier 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 New Frontier Energy are associated (or correlated) with Magnolia Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnolia Oil Gas has no effect on the direction of New Frontier i.e., New Frontier and Magnolia Oil go up and down completely randomly.

Pair Corralation between New Frontier and Magnolia Oil

Given the investment horizon of 90 days New Frontier Energy is expected to under-perform the Magnolia Oil. In addition to that, New Frontier is 3.51 times more volatile than Magnolia Oil Gas. It trades about -0.05 of its total potential returns per unit of risk. Magnolia Oil Gas is currently generating about 0.03 per unit of volatility. If you would invest  2,139  in Magnolia Oil Gas on October 26, 2024 and sell it today you would earn a total of  397.00  from holding Magnolia Oil Gas or generate 18.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

New Frontier Energy  vs.  Magnolia Oil Gas

New Frontier Energy

Risk-Adjusted Performance

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Very Weak

Over the last 90 days New Frontier Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, New Frontier is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Magnolia Oil Gas

Risk-Adjusted Performance

0 of 100

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 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.

Pair Trading with New Frontier and Magnolia Oil

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

The idea behind New Frontier Energy and Magnolia 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.