Correlation Between Murphy Oil and GeoPark

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

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

Diversification Opportunities for Murphy Oil and GeoPark

0.88

Correlation Coefficient

Murphy Oil  GeoPark

Very poor diversification

The 3 months correlation between Murphy and GeoPark is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Murphy Oil and GeoPark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeoPark and Murphy 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 Murphy Oil are associated (or correlated) with GeoPark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GeoPark has no effect on the direction of Murphy Oil i.e., Murphy Oil and GeoPark go up and down completely randomly.

Pair Corralation between Murphy Oil and GeoPark

Considering the 90-day investment horizon Murphy Oil is expected to generate 0.77 times more return on investment than GeoPark. However, Murphy Oil is 1.29 times less risky than GeoPark. It trades about -0.01 of its potential returns per unit of risk. GeoPark is currently generating about -0.05 per unit of risk. If you would invest  2,925  in Murphy Oil on December 29, 2024 and sell it today you would lose (75.00) from holding Murphy Oil or give up 2.56% of portfolio value over 90 days.

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

Murphy Oil  vs.  GeoPark

Murphy Oil

Risk-Adjusted Performance

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.

GeoPark

Risk-Adjusted Performance

Very Weak

Over the last 90 days GeoPark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Murphy Oil and GeoPark

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

The idea behind Murphy Oil and GeoPark 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.