Correlation Between Murphy USA and Barnes Noble

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

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

Diversification Opportunities for Murphy USA and Barnes Noble

0.65

Correlation Coefficient

Murphy USA  Barnes Noble

Poor diversification

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

Pair Corralation between Murphy USA and Barnes Noble

Given the investment horizon of 90 days Murphy USA is expected to under-perform the Barnes Noble. But the stock apears to be less risky and, when comparing its historical volatility, Murphy USA is 5.33 times less risky than Barnes Noble. The stock trades about -0.35 of its potential returns per unit of risk. The Barnes Noble Education is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,100  in Barnes Noble Education on October 5, 2024 and sell it today you would lose (96.00) from holding Barnes Noble Education or give up 8.73% of portfolio value over 90 days.

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

Murphy USA  vs.  Barnes Noble Education

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.

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.

Pair Trading with Murphy USA and Barnes Noble

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

The idea behind Murphy USA and Barnes Noble Education 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 CEOs Directory module to screen CEOs from public companies around the world.