Correlation Between Comstock Resources and Murphy Oil

Can any of the company-specific risk be diversified away by investing in both Comstock 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 Comstock 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 Comstock Resources and Murphy Oil, you can compare the effects of market volatilities on Comstock 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 Comstock Resources with a short position of Murphy Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Comstock Resources and Murphy Oil.

Diversification Opportunities for Comstock Resources and Murphy Oil

-0.54

Correlation Coefficient

Comstock Resources  Murphy Oil

Excellent diversification

The 3 months correlation between Comstock and Murphy is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Comstock Resources and Murphy Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy Oil and Comstock 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 Comstock 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 Comstock Resources i.e., Comstock Resources and Murphy Oil go up and down completely randomly.

Pair Corralation between Comstock Resources and Murphy Oil

Considering the 90-day investment horizon Comstock Resources is expected to generate 1.6 times more return on investment than Murphy Oil. However, Comstock Resources is 1.6 times more volatile than Murphy Oil. It trades about 0.27 of its potential returns per unit of risk. Murphy Oil is currently generating about -0.1 per unit of risk. If you would invest  992.00  in Comstock Resources on September 17, 2024 and sell it today you would earn a total of  688.00  from holding Comstock Resources or generate 69.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Comstock Resources  vs.  Murphy Oil

Comstock Resources

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Comstock Resources are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Comstock Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Comstock Resources and Murphy Oil

The main advantage of trading using opposite Comstock Resources and Murphy Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Comstock 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 Comstock 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.