Correlation Between MV Oil and Murphy Oil

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

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

Diversification Opportunities for MV Oil and Murphy Oil

0.22

Correlation Coefficient

MV Oil  Murphy Oil

Modest diversification

The 3 months correlation between MVO and Murphy is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding MV Oil Trust and Murphy Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy Oil and MV Oil 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 MV Oil Trust are associated (or correlated) with Murphy Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murphy Oil has no effect on the direction of MV Oil i.e., MV Oil and Murphy Oil go up and down completely randomly.

Pair Corralation between MV Oil and Murphy Oil

Considering the 90-day investment horizon MV Oil Trust is expected to generate 0.79 times more return on investment than Murphy Oil. However, MV Oil Trust is 1.27 times less risky than Murphy Oil. It trades about 0.0 of its potential returns per unit of risk. Murphy Oil is currently generating about -0.06 per unit of risk. If you would invest  881.00  in MV Oil Trust on September 2, 2024 and sell it today you would lose (5.00) from holding MV Oil Trust or give up 0.57% of portfolio value over 90 days.

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

MV Oil Trust  vs.  Murphy Oil

MV Oil Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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

Murphy Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Murphy Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with MV Oil and Murphy Oil

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

The idea behind MV Oil Trust and Murphy Oil 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.