Correlation Between Murphy Oil and Sitio Royalties
Can any of the company-specific risk be diversified away by investing in both Murphy Oil and Sitio Royalties 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 Sitio Royalties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Murphy Oil and Sitio Royalties Corp, you can compare the effects of market volatilities on Murphy Oil and Sitio Royalties 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 Sitio Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Murphy Oil and Sitio Royalties.
Diversification Opportunities for Murphy Oil and Sitio Royalties
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Murphy and Sitio is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Murphy Oil and Sitio Royalties Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitio Royalties Corp 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 Sitio Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitio Royalties Corp has no effect on the direction of Murphy Oil i.e., Murphy Oil and Sitio Royalties go up and down completely randomly.
Pair Corralation between Murphy Oil and Sitio Royalties
Considering the 90-day investment horizon Murphy Oil is expected to under-perform the Sitio Royalties. In addition to that, Murphy Oil is 1.28 times more volatile than Sitio Royalties Corp. It trades about -0.33 of its total potential returns per unit of risk. Sitio Royalties Corp is currently generating about 0.05 per unit of volatility. If you would invest 1,982 in Sitio Royalties Corp on November 3, 2024 and sell it today you would earn a total of 32.00 from holding Sitio Royalties Corp or generate 1.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Murphy Oil vs. Sitio Royalties Corp
Performance |
| Timeline |
| Murphy Oil |
| Sitio Royalties Corp |
Murphy Oil and Sitio Royalties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Murphy Oil and Sitio Royalties
The main advantage of trading using opposite Murphy Oil and Sitio Royalties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Murphy Oil position performs unexpectedly, Sitio Royalties 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 Sitio Royalties will offset losses from the drop in Sitio Royalties' long position.| Murphy Oil vs. Matador Resources | Murphy Oil vs. Civitas Resources | Murphy Oil vs. Magnolia Oil Gas | Murphy Oil vs. SM Energy Co |
| Sitio Royalties vs. Black Stone Minerals | Sitio Royalties vs. Dorchester Minerals LP | Sitio Royalties vs. MV Oil Trust | Sitio Royalties vs. VOC Energy Trust |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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