Correlation Between Murphy USA and Sportsmans

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

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

Diversification Opportunities for Murphy USA and Sportsmans

-0.7

Correlation Coefficient

Murphy USA  Sportsmans

Excellent diversification

The 3 months correlation between Murphy and Sportsmans is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Murphy USA and Sportsmans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sportsmans 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 Sportsmans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sportsmans has no effect on the direction of Murphy USA i.e., Murphy USA and Sportsmans go up and down completely randomly.

Pair Corralation between Murphy USA and Sportsmans

Given the investment horizon of 90 days Murphy USA is expected to under-perform the Sportsmans. But the stock apears to be less risky and, when comparing its historical volatility, Murphy USA is 5.01 times less risky than Sportsmans. The stock trades about -0.35 of its potential returns per unit of risk. The Sportsmans is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  219.00  in Sportsmans on October 5, 2024 and sell it today you would earn a total of  38.00  from holding Sportsmans or generate 17.35% 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.  Sportsmans

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.

Sportsmans

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sportsmans has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Sportsmans is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Murphy USA and Sportsmans

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

The idea behind Murphy USA and Sportsmans 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.