Correlation Between Devon Energy and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both Devon Energy and Smithson Investment 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 Devon Energy and Smithson Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Devon Energy Corp and Smithson Investment Trust, you can compare the effects of market volatilities on Devon Energy and Smithson Investment 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 Devon Energy with a short position of Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Devon Energy and Smithson Investment.
Diversification Opportunities for Devon Energy and Smithson Investment
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Devon and Smithson is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy Corp and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust and Devon 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 Devon Energy Corp are associated (or correlated) with Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of Devon Energy i.e., Devon Energy and Smithson Investment go up and down completely randomly.
Pair Corralation between Devon Energy and Smithson Investment
Assuming the 90 days trading horizon Devon Energy Corp is expected to under-perform the Smithson Investment. In addition to that, Devon Energy is 1.76 times more volatile than Smithson Investment Trust. It trades about -0.02 of its total potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.27 per unit of volatility. If you would invest 140,800 in Smithson Investment Trust on August 31, 2024 and sell it today you would earn a total of 8,200 from holding Smithson Investment Trust or generate 5.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Devon Energy Corp vs. Smithson Investment Trust
Performance |
| Timeline |
| Devon Energy Corp |
| Smithson Investment Trust |
Devon Energy and Smithson Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Devon Energy and Smithson Investment
The main advantage of trading using opposite Devon Energy and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.| Devon Energy vs. Smithson Investment Trust | Devon Energy vs. Martin Marietta Materials | Devon Energy vs. Oakley Capital Investments | Devon Energy vs. Schroders Investment Trusts |
| Smithson Investment vs. Spirent Communications plc | Smithson Investment vs. Ally Financial | Smithson Investment vs. MT Bank Corp | Smithson Investment vs. Synchrony Financial |
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 the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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