Correlation Between Cross Timbers and Magnolia Oil

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

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

Diversification Opportunities for Cross Timbers and Magnolia Oil

0.37

Correlation Coefficient

Cross Timbers  Magnolia Oil

Weak diversification

The 3 months correlation between Cross and Magnolia is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Cross Timbers Royalty 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 Cross Timbers 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 Cross Timbers Royalty 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 Cross Timbers i.e., Cross Timbers and Magnolia Oil go up and down completely randomly.

Pair Corralation between Cross Timbers and Magnolia Oil

Considering the 90-day investment horizon Cross Timbers Royalty is expected to generate 1.2 times more return on investment than Magnolia Oil. However, Cross Timbers is 1.2 times more volatile than Magnolia Oil Gas. It trades about 0.08 of its potential returns per unit of risk. Magnolia Oil Gas is currently generating about 0.0 per unit of risk. If you would invest  902.00  in Cross Timbers Royalty on September 18, 2024 and sell it today you would earn a total of  98.00  from holding Cross Timbers Royalty or generate 10.86% return on investment over 90 days.

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

Cross Timbers Royalty  vs.  Magnolia Oil Gas

Cross Timbers Royalty

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cross Timbers Royalty are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cross Timbers may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Magnolia Oil Gas

Risk-Adjusted Performance

0 of 100

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 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 Cross Timbers and Magnolia Oil

The main advantage of trading using opposite Cross Timbers and Magnolia Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cross Timbers 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 Cross Timbers Royalty 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.