Correlation Between Murphy USA and Best Buy

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

Diversification Opportunities for Murphy USA and Best Buy

  Correlation Coefficient

Modest diversification

The 3 months correlation between Murphy and Best Buy is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Murphy USA and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and Murphy USA 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 USA are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Murphy USA i.e., Murphy USA and Best Buy go up and down completely randomly.

Pair Corralation between Murphy USA and Best Buy

Given the investment horizon of 90 days Murphy USA is expected to under-perform the Best Buy. But the stock apears to be less risky and, when comparing its historical volatility, Murphy USA is 2.64 times less risky than Best Buy. The stock trades about -0.18 of its potential returns per unit of risk. The Best Buy Co is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  6,601  in Best Buy Co on September 3, 2022 and sell it today you would earn a total of  2,059  from holding Best Buy Co or generate 31.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns

Murphy USA  vs.  Best Buy Co

 Performance (%) 
Murphy USA 
Murphy Performance
0 of 100
Over the last 90 days Murphy USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Murphy USA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Murphy Price Channel

Best Buy 
Best Buy Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Best Buy showed solid returns over the last few months and may actually be approaching a breakup point.

Best Buy Price Channel

Murphy USA and Best Buy Volatility Contrast

   Predicted Return Density   

Pair Trading with Murphy USA and Best Buy

The main advantage of trading using opposite Murphy USA and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Murphy USA position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.
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The idea behind Murphy USA and Best Buy Co 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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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 Global Correlations module to find global opportunities by holding instruments from different markets.

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