Correlation Between Magnolia Oil and Cactus

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

Diversification Opportunities for Magnolia Oil and Cactus

0.87

Correlation Coefficient

Magnolia Oil  Cactus

Very poor diversification

The 3 months correlation between Magnolia and Cactus is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Magnolia Oil Gas and Cactus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Inc 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 Cactus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cactus Inc has no effect on the direction of Magnolia Oil i.e., Magnolia Oil and Cactus go up and down completely randomly.

Pair Corralation between Magnolia Oil and Cactus

Considering the 90-day investment horizon Magnolia Oil Gas is expected to generate 0.75 times more return on investment than Cactus. However, Magnolia Oil Gas is 1.33 times less risky than Cactus. It trades about 0.14 of its potential returns per unit of risk. Cactus Inc is currently generating about 0.01 per unit of risk. If you would invest  2,054  in Magnolia Oil Gas on May 7, 2025 and sell it today you would earn a total of  328.00  from holding Magnolia Oil Gas or generate 15.97% return on investment over 90 days.

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

Magnolia Oil Gas  vs.  Cactus Inc

Magnolia Oil Gas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnolia Oil Gas are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Magnolia Oil showed solid returns over the last few months and may actually be approaching a breakup point.

Cactus Inc

Risk-Adjusted Performance

Weak

Over the last 90 days Cactus Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Cactus is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Magnolia Oil and Cactus

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

The idea behind Magnolia Oil Gas and Cactus Inc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.