Correlation Between Vital Energy and Magnolia Oil

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

Diversification Opportunities for Vital Energy and Magnolia Oil

0.32

Correlation Coefficient

Vital Energy  Magnolia Oil

Weak diversification

The 3 months correlation between Vital and Magnolia is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vital 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 Vital 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 Vital 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 Vital Energy i.e., Vital Energy and Magnolia Oil go up and down completely randomly.

Pair Corralation between Vital Energy and Magnolia Oil

Given the investment horizon of 90 days Vital Energy is expected to generate 1.78 times more return on investment than Magnolia Oil. However, Vital Energy is 1.78 times more volatile than Magnolia Oil Gas. It trades about -0.07 of its potential returns per unit of risk. Magnolia Oil Gas is currently generating about -0.15 per unit of risk. If you would invest  3,283  in Vital Energy on November 28, 2024 and sell it today you would lose (497.00) from holding Vital Energy or give up 15.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Vital Energy  vs.  Magnolia Oil Gas

Vital Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vital Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Magnolia Oil Gas

Risk-Adjusted Performance

Very 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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Vital Energy and Magnolia Oil

The main advantage of trading using opposite Vital Energy and Magnolia Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vital 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 Vital 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.