Correlation Between Murphy USA and Hibbett Sports

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

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

Diversification Opportunities for Murphy USA and Hibbett Sports

0.26

Correlation Coefficient

Murphy USA  Hibbett Sports

Modest diversification

The 3 months correlation between Murphy and Hibbett is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Murphy USA and Hibbett Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hibbett Sports 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 Hibbett Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hibbett Sports has no effect on the direction of Murphy USA i.e., Murphy USA and Hibbett Sports go up and down completely randomly.

Pair Corralation between Murphy USA and Hibbett Sports

Given the investment horizon of 90 days Murphy USA is expected to generate 3.01 times less return on investment than Hibbett Sports. But when comparing it to its historical volatility, Murphy USA is 2.19 times less risky than Hibbett Sports. It trades about 0.16 of its potential returns per unit of risk. Hibbett Sports is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  7,249  in Hibbett Sports on February 20, 2024 and sell it today you would earn a total of  1,385  from holding Hibbett Sports or generate 19.11% return on investment over 90 days.

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

Murphy USA  vs.  Hibbett Sports

Murphy USA

Risk-Adjusted Performance

8 of 100

OK

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 inconsistent basic indicators, Murphy USA may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Hibbett Sports

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hibbett Sports are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental drivers, Hibbett Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Murphy USA and Hibbett Sports

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

The idea behind Murphy USA and Hibbett Sports 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.