Correlation Between Murphy Oil and San Juan

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

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

Diversification Opportunities for Murphy Oil and San Juan

-0.25

Correlation Coefficient

Murphy Oil  San Juan

Very good diversification

The 3 months correlation between Murphy and San is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Murphy Oil and San Juan Basin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Juan Basin and Murphy Oil 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 Murphy Oil are associated (or correlated) with San Juan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Juan Basin has no effect on the direction of Murphy Oil i.e., Murphy Oil and San Juan go up and down completely randomly.

Pair Corralation between Murphy Oil and San Juan

Considering the 90-day investment horizon Murphy Oil is expected to under-perform the San Juan. But the stock apears to be less risky and, when comparing its historical volatility, Murphy Oil is 1.44 times less risky than San Juan. The stock trades about -0.13 of its potential returns per unit of risk. The San Juan Basin is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  406.00  in San Juan Basin on September 25, 2024 and sell it today you would lose (15.00) from holding San Juan Basin or give up 3.69% of portfolio value over 90 days.

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

Murphy Oil  vs.  San Juan Basin

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 conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

San Juan Basin

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Murphy Oil and San Juan

The main advantage of trading using opposite Murphy Oil and San Juan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Murphy Oil position performs unexpectedly, San Juan 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 San Juan will offset losses from the drop in San Juan's long position.

The idea behind Murphy Oil and San Juan Basin 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.