Correlation Between California Resources and Murphy Oil

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

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

Diversification Opportunities for California Resources and Murphy Oil

0.56

Correlation Coefficient

California Resources  Murphy Oil

Very weak diversification

The 3 months correlation between California and Murphy is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding California Resources Corp and Murphy Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy Oil and California Resources 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 California Resources Corp 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 California Resources i.e., California Resources and Murphy Oil go up and down completely randomly.

Pair Corralation between California Resources and Murphy Oil

Considering the 90-day investment horizon California Resources Corp is expected to generate 1.05 times more return on investment than Murphy Oil. However, California Resources is 1.05 times more volatile than Murphy Oil. It trades about 0.02 of its potential returns per unit of risk. Murphy Oil is currently generating about -0.02 per unit of risk. If you would invest  5,206  in California Resources Corp on October 27, 2024 and sell it today you would earn a total of  45.00  from holding California Resources Corp or generate 0.86% return on investment over 90 days.

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

California Resources Corp  vs.  Murphy Oil

California Resources Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in California Resources Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, California Resources is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 California Resources and Murphy Oil

The main advantage of trading using opposite California Resources and Murphy Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Resources 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 California Resources Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.