Correlation Between Sabine Royalty and Murphy Oil

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

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

Diversification Opportunities for Sabine Royalty and Murphy Oil

-0.13

Correlation Coefficient

Sabine Royalty  Murphy Oil

Good diversification

The 3 months correlation between Sabine and Murphy is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sabine Royalty Trust and Murphy Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy Oil and Sabine Royalty 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 Sabine Royalty 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 Sabine Royalty i.e., Sabine Royalty and Murphy Oil go up and down completely randomly.

Pair Corralation between Sabine Royalty and Murphy Oil

Considering the 90-day investment horizon Sabine Royalty Trust is expected to generate 0.87 times more return on investment than Murphy Oil. However, Sabine Royalty Trust is 1.15 times less risky than Murphy Oil. It trades about -0.01 of its potential returns per unit of risk. Murphy Oil is currently generating about -0.01 per unit of risk. If you would invest  7,460  in Sabine Royalty Trust on October 13, 2024 and sell it today you would lose (1,019) from holding Sabine Royalty Trust or give up 13.66% of portfolio value over 90 days.

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

Sabine Royalty Trust  vs.  Murphy Oil

Sabine Royalty Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sabine Royalty Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Sabine Royalty is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail 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 relatively invariable basic indicators, Murphy Oil is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sabine Royalty and Murphy Oil

The main advantage of trading using opposite Sabine Royalty and Murphy Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabine Royalty 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 Sabine Royalty 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.