Correlation Between Marathon Oil and HighPeak Energy

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

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

Diversification Opportunities for Marathon Oil and HighPeak Energy

-0.59

Correlation Coefficient

Marathon Oil  HighPeak Energy

Excellent diversification

The 3 months correlation between Marathon and HighPeak is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Oil and HighPeak Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HighPeak Energy 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 HighPeak Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HighPeak Energy has no effect on the direction of Marathon Oil i.e., Marathon Oil and HighPeak Energy go up and down completely randomly.

Pair Corralation between Marathon Oil and HighPeak Energy

Considering the 90-day investment horizon Marathon Oil is expected to generate 9.12 times less return on investment than HighPeak Energy. But when comparing it to its historical volatility, Marathon Oil is 5.0 times less risky than HighPeak Energy. It trades about 0.02 of its potential returns per unit of risk. HighPeak Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  628.00  in HighPeak Energy on January 31, 2024 and sell it today you would lose (28.00) from holding HighPeak Energy or give up 4.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.46%
Values	Daily Returns

Marathon Oil  vs.  HighPeak Energy

Marathon Oil

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marathon Oil are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Marathon Oil displayed solid returns over the last few months and may actually be approaching a breakup point.

HighPeak Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HighPeak Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in May 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Marathon Oil and HighPeak Energy

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

The idea behind Marathon Oil and HighPeak Energy 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.