Correlation Between Marathon Oil and Chembio Diagnostics

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Can any of the company-specific risk be diversified away by investing in both Marathon Oil and Chembio Diagnostics 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 Chembio Diagnostics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marathon Oil and Chembio Diagnostics, you can compare the effects of market volatilities on Marathon Oil and Chembio Diagnostics 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 Chembio Diagnostics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marathon Oil and Chembio Diagnostics.

Diversification Opportunities for Marathon Oil and Chembio Diagnostics

-0.55
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Marathon and Chembio is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Oil and Chembio Diagnostics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chembio Diagnostics 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 Chembio Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chembio Diagnostics has no effect on the direction of Marathon Oil i.e., Marathon Oil and Chembio Diagnostics go up and down completely randomly.

Pair Corralation between Marathon Oil and Chembio Diagnostics

Considering the 90-day investment horizon Marathon Oil is expected to under-perform the Chembio Diagnostics. But the stock apears to be less risky and, when comparing its historical volatility, Marathon Oil is 2.54 times less risky than Chembio Diagnostics. The stock trades about -0.28 of its potential returns per unit of risk. The Chembio Diagnostics is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Chembio Diagnostics on September 10, 2022 and sell it today you would earn a total of  7.00  from holding Chembio Diagnostics or generate 30.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Marathon Oil  vs.  Chembio Diagnostics

 Performance (%) 
       Timeline  
Marathon Oil 
Marathon Performance
0 of 100
Over the last 90 days Marathon Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Marathon Oil is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Marathon Price Channel

Chembio Diagnostics 
Chembio Performance
0 of 100
Over the last 90 days Chembio Diagnostics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Chembio Price Channel

Marathon Oil and Chembio Diagnostics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Marathon Oil and Chembio Diagnostics

The main advantage of trading using opposite Marathon Oil and Chembio Diagnostics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marathon Oil position performs unexpectedly, Chembio Diagnostics 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 Chembio Diagnostics will offset losses from the drop in Chembio Diagnostics' long position.
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The idea behind Marathon Oil and Chembio Diagnostics 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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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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