Correlation Between Sportsmans and Murphy USA

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Can any of the company-specific risk be diversified away by investing in both Sportsmans 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 Sportsmans and Murphy USA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sportsmans and Murphy USA, you can compare the effects of market volatilities on Sportsmans 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 Sportsmans with a short position of Murphy USA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sportsmans and Murphy USA.

Diversification Opportunities for Sportsmans and Murphy USA

-0.7
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Sportsmans and Murphy is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sportsmans and Murphy USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy USA and Sportsmans 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 Sportsmans 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 Sportsmans i.e., Sportsmans and Murphy USA go up and down completely randomly.

Pair Corralation between Sportsmans and Murphy USA

Given the investment horizon of 90 days Sportsmans is expected to under-perform the Murphy USA. In addition to that, Sportsmans is 4.06 times more volatile than Murphy USA. It trades about -0.01 of its total potential returns per unit of risk. Murphy USA is currently generating about 0.05 per unit of volatility. If you would invest  47,638  in Murphy USA on October 5, 2024 and sell it today you would earn a total of  1,730  from holding Murphy USA or generate 3.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Sportsmans  vs.  Murphy USA

 Performance 
       Timeline  
Sportsmans 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Murphy USA 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
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 and Murphy USA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sportsmans and Murphy USA

The main advantage of trading using opposite Sportsmans and Murphy USA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sportsmans 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 Sportsmans 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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