Correlation Between Lands End and Murphy USA

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Can any of the company-specific risk be diversified away by investing in both Lands End and Murphy USA 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 Lands End and Murphy USA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lands End and Murphy USA, you can compare the effects of market volatilities on Lands End and Murphy USA 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 Lands End with a short position of Murphy USA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lands End and Murphy USA.

Diversification Opportunities for Lands End and Murphy USA

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Lands and Murphy is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lands End and Murphy USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy USA and Lands End 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 Lands End are associated (or correlated) with Murphy USA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murphy USA has no effect on the direction of Lands End i.e., Lands End and Murphy USA go up and down completely randomly.

Pair Corralation between Lands End and Murphy USA

Allowing for the 90-day total investment horizon Lands End is expected to generate 1.06 times less return on investment than Murphy USA. In addition to that, Lands End is 2.48 times more volatile than Murphy USA. It trades about 0.03 of its total potential returns per unit of risk. Murphy USA is currently generating about 0.09 per unit of volatility. If you would invest  13,652  in Murphy USA on May 13, 2022 and sell it today you would earn a total of  14,769  from holding Murphy USA or generate 108.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Lands End  vs.  Murphy USA

 Performance (%) 
       Timeline  
Lands End 
Lands Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Lands End are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Lands End exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lands Price Channel

Murphy USA 
Murphy Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Murphy USA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Murphy USA sustained solid returns over the last few months and may actually be approaching a breakup point.

Murphy Price Channel

Lands End and Murphy USA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lands End and Murphy USA

The main advantage of trading using opposite Lands End and Murphy USA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lands End position performs unexpectedly, Murphy USA 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 USA will offset losses from the drop in Murphy USA's long position.
The idea behind Lands End and Murphy USA 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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