Correlation Between Barrel Energy and Murphy Oil

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

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

Diversification Opportunities for Barrel Energy and Murphy Oil

0.38

Correlation Coefficient

Barrel Energy  Murphy Oil

Weak diversification

The 3 months correlation between Barrel and Murphy is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Barrel Energy and Murphy Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy Oil and Barrel Energy 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 Barrel Energy 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 Barrel Energy i.e., Barrel Energy and Murphy Oil go up and down completely randomly.

Pair Corralation between Barrel Energy and Murphy Oil

Given the investment horizon of 90 days Barrel Energy is expected to generate 8.58 times more return on investment than Murphy Oil. However, Barrel Energy is 8.58 times more volatile than Murphy Oil. It trades about 0.11 of its potential returns per unit of risk. Murphy Oil is currently generating about 0.17 per unit of risk. If you would invest  0.28  in Barrel Energy on October 27, 2024 and sell it today you would earn a total of  0.03  from holding Barrel Energy or generate 10.71% return on investment over 90 days.

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

Barrel Energy  vs.  Murphy Oil

Barrel Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barrel Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, Barrel Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 relatively invariable basic indicators, Murphy Oil is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Barrel Energy and Murphy Oil

The main advantage of trading using opposite Barrel Energy and Murphy Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barrel Energy 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 Barrel Energy 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..