Correlation Between Murphy USA and Arko Corp

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

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

Diversification Opportunities for Murphy USA and Arko Corp

0.43

Correlation Coefficient

Murphy USA  Arko Corp

Very weak diversification

The 3 months correlation between Murphy and Arko is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Murphy USA and Arko Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arko Corp and Murphy USA 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 USA are associated (or correlated) with Arko Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arko Corp has no effect on the direction of Murphy USA i.e., Murphy USA and Arko Corp go up and down completely randomly.

Pair Corralation between Murphy USA and Arko Corp

Given the investment horizon of 90 days Murphy USA is expected to generate 0.57 times more return on investment than Arko Corp. However, Murphy USA is 1.74 times less risky than Arko Corp. It trades about 0.04 of its potential returns per unit of risk. Arko Corp is currently generating about -0.03 per unit of risk. If you would invest  49,238  in Murphy USA on September 29, 2024 and sell it today you would earn a total of  1,285  from holding Murphy USA or generate 2.61% return on investment over 90 days.

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

Murphy USA  vs.  Arko Corp

Murphy USA

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Murphy USA are ranked lower than 2 (%) 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.

Arko Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arko Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, Arko Corp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Murphy USA and Arko Corp

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

The idea behind Murphy USA and Arko Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.