Correlation Between Murphy USA and ODP Corp

Can any of the company-specific risk be diversified away by investing in both Murphy USA and ODP 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 ODP 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 ODP Corp, you can compare the effects of market volatilities on Murphy USA and ODP 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 ODP Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Murphy USA and ODP Corp.

Diversification Opportunities for Murphy USA and ODP Corp

0.83

Correlation Coefficient

Murphy USA  ODP Corp

Very poor diversification

The 3 months correlation between Murphy and ODP is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Murphy USA and ODP Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODP 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 ODP Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODP Corp has no effect on the direction of Murphy USA i.e., Murphy USA and ODP Corp go up and down completely randomly.

Pair Corralation between Murphy USA and ODP Corp

Given the investment horizon of 90 days Murphy USA is expected to generate 0.38 times more return on investment than ODP Corp. However, Murphy USA is 2.64 times less risky than ODP Corp. It trades about -0.09 of its potential returns per unit of risk. ODP Corp is currently generating about -0.14 per unit of risk. If you would invest  50,468  in Murphy USA on December 27, 2024 and sell it today you would lose (4,711) from holding Murphy USA or give up 9.33% of portfolio value over 90 days.

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

Murphy USA  vs.  ODP Corp

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.

ODP Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ODP Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Murphy USA and ODP Corp

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

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