Correlation Between Walmart and Murphy USA

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

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

Diversification Opportunities for Walmart and Murphy USA

0.44

Correlation Coefficient

Walmart  Murphy USA

Very weak diversification

The 3 months correlation between Walmart and Murphy is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Murphy USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy USA and Walmart 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 Walmart 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 Walmart i.e., Walmart and Murphy USA go up and down completely randomly.

Pair Corralation between Walmart and Murphy USA

Considering the 90-day investment horizon Walmart is expected to generate 1.04 times more return on investment than Murphy USA. However, Walmart is 1.04 times more volatile than Murphy USA. It trades about -0.05 of its potential returns per unit of risk. Murphy USA is currently generating about -0.07 per unit of risk. If you would invest  9,032  in Walmart on December 28, 2024 and sell it today you would lose (517.00) from holding Walmart or give up 5.72% of portfolio value over 90 days.

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

Walmart  vs.  Murphy USA

Walmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Walmart and Murphy USA

The main advantage of trading using opposite Walmart and Murphy USA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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 Walmart 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.