Correlation Between Ring Energy and Magnolia Oil

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

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

Diversification Opportunities for Ring Energy and Magnolia Oil

-0.21

Correlation Coefficient

Ring Energy  Magnolia Oil

Very good diversification

The 3 months correlation between Ring and Magnolia is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ring 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 Ring Energy 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 Ring 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 Ring Energy i.e., Ring Energy and Magnolia Oil go up and down completely randomly.

Pair Corralation between Ring Energy and Magnolia Oil

Considering the 90-day investment horizon Ring Energy is expected to under-perform the Magnolia Oil. In addition to that, Ring Energy is 1.41 times more volatile than Magnolia Oil Gas. It trades about -0.15 of its total potential returns per unit of risk. Magnolia Oil Gas is currently generating about -0.15 per unit of volatility. If you would invest  2,715  in Magnolia Oil Gas on September 13, 2024 and sell it today you would lose (144.00) from holding Magnolia Oil Gas or give up 5.3% of portfolio value over 90 days.

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

Ring Energy  vs.  Magnolia Oil Gas

Ring Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ring Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Magnolia Oil Gas

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magnolia Oil Gas are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Magnolia Oil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ring Energy and Magnolia Oil

The main advantage of trading using opposite Ring Energy and Magnolia Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ring Energy 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 Ring 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.