Correlation Between Vital Energy and Murphy Oil

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

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

Diversification Opportunities for Vital Energy and Murphy Oil

0.52

Correlation Coefficient

Vital Energy  Murphy Oil

Very weak diversification

The 3 months correlation between Vital and Murphy is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Vital Energy and Murphy Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy Oil and Vital Energy 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 Vital Energy 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 Vital Energy i.e., Vital Energy and Murphy Oil go up and down completely randomly.

Pair Corralation between Vital Energy and Murphy Oil

Given the investment horizon of 90 days Vital Energy is expected to generate 1.29 times more return on investment than Murphy Oil. However, Vital Energy is 1.29 times more volatile than Murphy Oil. It trades about 0.46 of its potential returns per unit of risk. Murphy Oil is currently generating about 0.14 per unit of risk. If you would invest  2,603  in Vital Energy on September 2, 2024 and sell it today you would earn a total of  680.00  from holding Vital Energy or generate 26.12% return on investment over 90 days.

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

Vital Energy  vs.  Murphy Oil

Vital Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vital Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Vital Energy is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Vital Energy and Murphy Oil

The main advantage of trading using opposite Vital Energy and Murphy Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vital Energy 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 Vital Energy 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.