Correlation Between Marathon Oil and ConocoPhillips

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

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

Diversification Opportunities for Marathon Oil and ConocoPhillips

-0.22

Correlation Coefficient

Marathon Oil  ConocoPhillips

Very good diversification

The 3 months correlation between Marathon and ConocoPhillips is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Oil and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Marathon 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 Marathon Oil are associated (or correlated) with ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of Marathon Oil i.e., Marathon Oil and ConocoPhillips go up and down completely randomly.

Pair Corralation between Marathon Oil and ConocoPhillips

Assuming the 90 days trading horizon Marathon Oil is expected to generate 0.47 times more return on investment than ConocoPhillips. However, Marathon Oil is 2.12 times less risky than ConocoPhillips. It trades about 0.12 of its potential returns per unit of risk. ConocoPhillips is currently generating about 0.05 per unit of risk. If you would invest  53,792  in Marathon Oil on September 30, 2024 and sell it today you would earn a total of  2,608  from holding Marathon Oil or generate 4.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	63.93%
Values	Daily Returns

Marathon Oil  vs.  ConocoPhillips

Marathon Oil

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Marathon Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Marathon Oil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ConocoPhillips

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, ConocoPhillips may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Marathon Oil and ConocoPhillips

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

The idea behind Marathon Oil and ConocoPhillips 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 CEOs Directory module to screen CEOs from public companies around the world.