Correlation Between JD and Murphy USA
Can any of the company-specific risk be diversified away by investing in both JD 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 JD and Murphy USA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JD Inc Adr and Murphy USA, you can compare the effects of market volatilities on JD 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 JD with a short position of Murphy USA. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD and Murphy USA.
Diversification Opportunities for JD and Murphy USA
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between JD and Murphy is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding JD Inc Adr and Murphy USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy USA and JD 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 JD Inc Adr 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 JD i.e., JD and Murphy USA go up and down completely randomly.
Pair Corralation between JD and Murphy USA
Allowing for the 90-day total investment horizon JD Inc Adr is expected to generate 2.7 times more return on investment than Murphy USA. However, JD is 2.7 times more volatile than Murphy USA. It trades about 0.27 of its potential returns per unit of risk. Murphy USA is currently generating about 0.08 per unit of risk. If you would invest 3,423 in JD Inc Adr on November 3, 2024 and sell it today you would earn a total of 649.00 from holding JD Inc Adr or generate 18.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JD Inc Adr vs. Murphy USA
Performance |
| Timeline |
| JD Inc Adr |
| Murphy USA |
JD and Murphy USA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JD and Murphy USA
The main advantage of trading using opposite JD and Murphy USA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD 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 JD Inc Adr 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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