Correlation Between Ford and Murphy USA
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Murphy USA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Murphy USA, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Murphy USA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Murphy USA.
Diversification Opportunities for Ford and Murphy USA
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Murphy is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Murphy USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy USA and Ford 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 Ford Motor 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 Ford i.e., Ford and Murphy USA go up and down completely randomly.
Pair Corralation between Ford and Murphy USA
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.35 times more return on investment than Murphy USA. However, Ford is 1.35 times more volatile than Murphy USA. It trades about 0.13 of its potential returns per unit of risk. Murphy USA is currently generating about 0.08 per unit of risk. If you would invest 965.00 in Ford Motor on November 3, 2024 and sell it today you would earn a total of 43.00 from holding Ford Motor or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Murphy USA
Performance |
| Timeline |
| Ford Motor |
| Murphy USA |
Ford and Murphy USA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Murphy USA
The main advantage of trading using opposite Ford and Murphy USA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| Murphy USA vs. Group 1 Automotive | Murphy USA vs. Murphy Oil | Murphy USA vs. LCI Industries | Murphy USA vs. Penske Automotive Group |
Check out your portfolio center.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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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