Correlation Between Murphy Oil and Obsidian Energy

Can any of the company-specific risk be diversified away by investing in both Murphy Oil and Obsidian Energy 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 Obsidian Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Murphy Oil and Obsidian Energy, you can compare the effects of market volatilities on Murphy Oil and Obsidian Energy 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 Obsidian Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Murphy Oil and Obsidian Energy.

Diversification Opportunities for Murphy Oil and Obsidian Energy

0.66

Correlation Coefficient

Murphy Oil  Obsidian Energy

Poor diversification

The 3 months correlation between Murphy and Obsidian is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Murphy Oil and Obsidian Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Obsidian Energy 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 Obsidian Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Obsidian Energy has no effect on the direction of Murphy Oil i.e., Murphy Oil and Obsidian Energy go up and down completely randomly.

Pair Corralation between Murphy Oil and Obsidian Energy

Considering the 90-day investment horizon Murphy Oil is expected to under-perform the Obsidian Energy. But the stock apears to be less risky and, when comparing its historical volatility, Murphy Oil is 1.33 times less risky than Obsidian Energy. The stock trades about -0.11 of its potential returns per unit of risk. The Obsidian Energy is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  584.00  in Obsidian Energy on September 17, 2024 and sell it today you would lose (55.50) from holding Obsidian Energy or give up 9.5% of portfolio value over 90 days.

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

Murphy Oil  vs.  Obsidian Energy

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 unsteady 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.

Obsidian Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Obsidian Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Murphy Oil and Obsidian Energy

The main advantage of trading using opposite Murphy Oil and Obsidian Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Murphy Oil position performs unexpectedly, Obsidian Energy 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 Obsidian Energy will offset losses from the drop in Obsidian Energy's long position.

The idea behind Murphy Oil and Obsidian Energy 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.