Correlation Between San Juan and Murphy Oil

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

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

Diversification Opportunities for San Juan and Murphy Oil

-0.33

Correlation Coefficient

San Juan  Murphy Oil

Very good diversification

The 3 months correlation between San and Murphy is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding San Juan Basin and Murphy Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy Oil and San Juan 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 San Juan Basin 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 San Juan i.e., San Juan and Murphy Oil go up and down completely randomly.

Pair Corralation between San Juan and Murphy Oil

Considering the 90-day investment horizon San Juan Basin is expected to generate 1.53 times more return on investment than Murphy Oil. However, San Juan is 1.53 times more volatile than Murphy Oil. It trades about 0.21 of its potential returns per unit of risk. Murphy Oil is currently generating about 0.01 per unit of risk. If you would invest  366.00  in San Juan Basin on December 27, 2024 and sell it today you would earn a total of  197.00  from holding San Juan Basin or generate 53.83% return on investment over 90 days.

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

San Juan Basin  vs.  Murphy Oil

San Juan Basin

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in San Juan Basin are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward-looking indicators, San Juan unveiled solid returns over the last few months and may actually be approaching a breakup point.

Murphy Oil

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Murphy Oil are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 San Juan and Murphy Oil

The main advantage of trading using opposite San Juan and Murphy Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if San Juan 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 San Juan Basin 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.