Correlation Between Murphy USA and Genuine Parts

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

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

Diversification Opportunities for Murphy USA and Genuine Parts

-0.69

Correlation Coefficient

Murphy USA  Genuine Parts

Excellent diversification

The 3 months correlation between Murphy and Genuine is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Murphy USA and Genuine Parts Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts 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 Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of Murphy USA i.e., Murphy USA and Genuine Parts go up and down completely randomly.

Pair Corralation between Murphy USA and Genuine Parts

Given the investment horizon of 90 days Murphy USA is expected to under-perform the Genuine Parts. In addition to that, Murphy USA is 1.17 times more volatile than Genuine Parts Co. It trades about -0.07 of its total potential returns per unit of risk. Genuine Parts Co is currently generating about 0.04 per unit of volatility. If you would invest  11,487  in Genuine Parts Co on December 28, 2024 and sell it today you would earn a total of  360.00  from holding Genuine Parts Co or generate 3.13% return on investment over 90 days.

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

Murphy USA  vs.  Genuine Parts Co

Murphy USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Murphy USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Genuine Parts

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Genuine Parts Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Genuine Parts is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Murphy USA and Genuine Parts

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

The idea behind Murphy USA and Genuine Parts Co 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.