Correlation Between SM Energy and Murphy Oil
Can any of the company-specific risk be diversified away by investing in both SM Energy 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 SM Energy and Murphy Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SM Energy Co and Murphy Oil, you can compare the effects of market volatilities on SM Energy 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 SM Energy with a short position of Murphy Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Energy and Murphy Oil.
Diversification Opportunities for SM Energy and Murphy Oil
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SM Energy and Murphy is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SM Energy Co and Murphy Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy Oil and SM Energy 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 SM Energy Co 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 SM Energy i.e., SM Energy and Murphy Oil go up and down completely randomly.
Pair Corralation between SM Energy and Murphy Oil
Allowing for the 90-day total investment horizon SM Energy Co is expected to generate 1.21 times more return on investment than Murphy Oil. However, SM Energy is 1.21 times more volatile than Murphy Oil. It trades about 0.16 of its potential returns per unit of risk. Murphy Oil is currently generating about 0.13 per unit of risk. If you would invest 4,196 in SM Energy Co on August 28, 2024 and sell it today you would earn a total of 318.00 from holding SM Energy Co or generate 7.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SM Energy Co vs. Murphy Oil
Performance |
| Timeline |
| SM Energy |
| Murphy Oil |
SM Energy and Murphy Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SM Energy and Murphy Oil
The main advantage of trading using opposite SM Energy and Murphy Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Energy 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.| SM Energy vs. Vital Energy | SM Energy vs. Permian Resources | SM Energy vs. Matador Resources | SM Energy vs. Obsidian Energy |
| Murphy Oil vs. Devon Energy | Murphy Oil vs. ConocoPhillips | Murphy Oil vs. Occidental Petroleum | Murphy Oil vs. Permian Resources |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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