Correlation Between APA and Murphy Oil

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

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

Diversification Opportunities for APA and Murphy Oil

0.78

Correlation Coefficient

APA  Murphy Oil

Poor diversification

The 3 months correlation between APA and Murphy is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding APA Corp. and Murphy Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy Oil and APA 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 APA Corporation are associated (or correlated) with Murphy Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murphy Oil has no effect on the direction of APA i.e., APA and Murphy Oil go up and down completely randomly.

Pair Corralation between APA and Murphy Oil

Considering the 90-day investment horizon APA Corporation is expected to under-perform the Murphy Oil. In addition to that, APA is 1.4 times more volatile than Murphy Oil. It trades about -0.08 of its total potential returns per unit of risk. Murphy Oil is currently generating about -0.06 per unit of volatility. If you would invest  3,534  in Murphy Oil on August 31, 2024 and sell it today you would lose (287.00) from holding Murphy Oil or give up 8.12% of portfolio value over 90 days.

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

APA Corp.  vs.  Murphy Oil

APA Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APA Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Murphy Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Murphy Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with APA and Murphy Oil

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

The idea behind APA Corporation and Murphy 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.