Correlation Between Earthstone Energy and Murphy Oil

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

Diversification Opportunities for Earthstone Energy and Murphy Oil

-0.39

Correlation Coefficient

Earthstone Energy  Murphy Oil

Very good diversification

The 3 months correlation between Earthstone and Murphy is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Earthstone Energy and Murphy Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy Oil and Earthstone 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 Earthstone Energy 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 Earthstone Energy i.e., Earthstone Energy and Murphy Oil go up and down completely randomly.

Pair Corralation between Earthstone Energy and Murphy Oil

If you would invest  1,532  in Earthstone Energy on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Earthstone Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.4%
Values	Daily Returns

Earthstone Energy  vs.  Murphy Oil

Earthstone Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Earthstone Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Earthstone Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Earthstone Energy and Murphy Oil

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

The idea behind Earthstone Energy 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.