Correlation Between OReilly Automotive and Murphy USA

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

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

Diversification Opportunities for OReilly Automotive and Murphy USA

-0.31

Correlation Coefficient

OReilly Automotive  Murphy USA

Very good diversification

The 3 months correlation between OReilly and Murphy is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding OReilly Automotive and Murphy USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy USA and OReilly Automotive 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 OReilly Automotive are associated (or correlated) with Murphy USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murphy USA has no effect on the direction of OReilly Automotive i.e., OReilly Automotive and Murphy USA go up and down completely randomly.

Pair Corralation between OReilly Automotive and Murphy USA

Given the investment horizon of 90 days OReilly Automotive is expected to generate 0.71 times more return on investment than Murphy USA. However, OReilly Automotive is 1.42 times less risky than Murphy USA. It trades about 0.15 of its potential returns per unit of risk. Murphy USA is currently generating about -0.15 per unit of risk. If you would invest  124,682  in OReilly Automotive on December 1, 2024 and sell it today you would earn a total of  12,682  from holding OReilly Automotive or generate 10.17% return on investment over 90 days.

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

OReilly Automotive  vs.  Murphy USA

OReilly Automotive

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OReilly Automotive are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, OReilly Automotive may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with OReilly Automotive and Murphy USA

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

The idea behind OReilly Automotive and Murphy USA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..