Correlation Between Barnes Noble and Murphy USA

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

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

Diversification Opportunities for Barnes Noble and Murphy USA

0.65

Correlation Coefficient

Barnes Noble  Murphy USA

Poor diversification

The 3 months correlation between Barnes and Murphy is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Noble Education and Murphy USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy USA and Barnes Noble 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 Barnes Noble Education are associated (or correlated) with Murphy USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murphy USA has no effect on the direction of Barnes Noble i.e., Barnes Noble and Murphy USA go up and down completely randomly.

Pair Corralation between Barnes Noble and Murphy USA

Given the investment horizon of 90 days Barnes Noble is expected to generate 2.23 times less return on investment than Murphy USA. In addition to that, Barnes Noble is 8.34 times more volatile than Murphy USA. It trades about 0.0 of its total potential returns per unit of risk. Murphy USA is currently generating about 0.09 per unit of volatility. If you would invest  26,553  in Murphy USA on October 5, 2024 and sell it today you would earn a total of  22,815  from holding Murphy USA or generate 85.92% return on investment over 90 days.

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

Barnes Noble Education  vs.  Murphy USA

Barnes Noble Education

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Noble Education are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Barnes Noble exhibited solid returns over the last few months and may actually be approaching a breakup point.

Murphy USA

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Murphy USA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Murphy USA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Barnes Noble and Murphy USA

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

The idea behind Barnes Noble Education and Murphy USA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.