Correlation Between EOG Resources and Murphy Oil

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

Diversification Opportunities for EOG Resources and Murphy Oil

0.07

Correlation Coefficient

EOG Resources  Murphy Oil

Significant diversification

The 3 months correlation between EOG and Murphy is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and Murphy Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy Oil and EOG 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 EOG 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 EOG Resources i.e., EOG Resources and Murphy Oil go up and down completely randomly.

Pair Corralation between EOG Resources and Murphy Oil

Considering the 90-day investment horizon EOG Resources is expected to generate 0.78 times more return on investment than Murphy Oil. However, EOG Resources is 1.28 times less risky than Murphy Oil. It trades about 0.08 of its potential returns per unit of risk. Murphy Oil is currently generating about -0.07 per unit of risk. If you would invest  11,738  in EOG Resources on September 12, 2024 and sell it today you would earn a total of  923.00  from holding EOG Resources or generate 7.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

EOG Resources  vs.  Murphy Oil

EOG Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EOG Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, EOG Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with EOG Resources and Murphy Oil

The main advantage of trading using opposite EOG Resources and Murphy Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EOG 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 EOG 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.