Correlation Between Black Stone and Marathon Oil

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

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

Diversification Opportunities for Black Stone and Marathon Oil

0.64

Correlation Coefficient

Black Stone  Marathon Oil

Poor diversification

The 3 months correlation between Black and Marathon is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Black Stone Minerals and Marathon Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Oil and Black Stone 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 Black Stone Minerals are associated (or correlated) with Marathon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Oil has no effect on the direction of Black Stone i.e., Black Stone and Marathon Oil go up and down completely randomly.

Pair Corralation between Black Stone and Marathon Oil

Considering the 90-day investment horizon Black Stone Minerals is expected to generate 0.73 times more return on investment than Marathon Oil. However, Black Stone Minerals is 1.37 times less risky than Marathon Oil. It trades about 0.02 of its potential returns per unit of risk. Marathon Oil is currently generating about 0.01 per unit of risk. If you would invest  1,429  in Black Stone Minerals on August 24, 2024 and sell it today you would earn a total of  127.00  from holding Black Stone Minerals or generate 8.89% return on investment over 90 days.

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

Black Stone Minerals  vs.  Marathon Oil

Black Stone Minerals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Black Stone Minerals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Black Stone may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Marathon Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marathon Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Marathon Oil is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Black Stone and Marathon Oil

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

The idea behind Black Stone Minerals and Marathon Oil 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.