Correlation Between Magnolia Oil and Crescent Energy

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

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

Diversification Opportunities for Magnolia Oil and Crescent Energy

0.95

Correlation Coefficient

Magnolia Oil  Crescent Energy

Almost no diversification

The 3 months correlation between Magnolia and Crescent is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and Crescent Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Energy and Magnolia 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 Magnolia Oil Gas are associated (or correlated) with Crescent Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Energy has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and Crescent Energy go up and down completely randomly.

Pair Corralation between Magnolia Oil and Crescent Energy

Considering the 90-day investment horizon Magnolia Oil is expected to generate 1.34 times less return on investment than Crescent Energy. But when comparing it to its historical volatility, Magnolia Oil Gas is 1.33 times less risky than Crescent Energy. It trades about 0.03 of its potential returns per unit of risk. Crescent Energy Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,123  in Crescent Energy Co on September 1, 2024 and sell it today you would earn a total of  364.00  from holding Crescent Energy Co or generate 32.41% return on investment over 90 days.

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

Magnolia Oil Gas  vs.  Crescent Energy Co

Magnolia Oil Gas

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnolia Oil Gas are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Magnolia Oil showed solid returns over the last few months and may actually be approaching a breakup point.

Crescent Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Energy Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Crescent Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magnolia Oil and Crescent Energy

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

The idea behind Magnolia Oil Gas and Crescent Energy Co 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..