Correlation Between Permian Resources and Murphy Oil

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

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

Diversification Opportunities for Permian Resources and Murphy Oil

0.94

Correlation Coefficient

Permian Resources  Murphy Oil

Almost no diversification

The 3 months correlation between Permian and Murphy is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Murphy Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy Oil and Permian Resources 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 Permian Resources 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 Permian Resources i.e., Permian Resources and Murphy Oil go up and down completely randomly.

Pair Corralation between Permian Resources and Murphy Oil

Allowing for the 90-day total investment horizon Permian Resources is expected to generate 1.26 times more return on investment than Murphy Oil. However, Permian Resources is 1.26 times more volatile than Murphy Oil. It trades about 0.08 of its potential returns per unit of risk. Murphy Oil is currently generating about 0.04 per unit of risk. If you would invest  605.00  in Permian Resources on March 14, 2024 and sell it today you would earn a total of  953.00  from holding Permian Resources or generate 157.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Permian Resources  vs.  Murphy Oil

Permian Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Permian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Permian Resources is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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 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 Permian Resources and Murphy Oil

The main advantage of trading using opposite Permian Resources and Murphy Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permian Resources 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 Permian Resources 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..