Correlation Between Devon Energy and McDonalds
Can any of the company-specific risk be diversified away by investing in both Devon Energy and McDonalds 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 McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Devon Energy and McDonalds, you can compare the effects of market volatilities on Devon Energy and McDonalds 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 McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Devon Energy and McDonalds.
Diversification Opportunities for Devon Energy and McDonalds
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Devon and McDonalds is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds 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 are associated (or correlated) with McDonalds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds has no effect on the direction of Devon Energy i.e., Devon Energy and McDonalds go up and down completely randomly.
Pair Corralation between Devon Energy and McDonalds
Assuming the 90 days trading horizon Devon Energy is expected to under-perform the McDonalds. In addition to that, Devon Energy is 1.53 times more volatile than McDonalds. It trades about -0.03 of its total potential returns per unit of risk. McDonalds is currently generating about 0.05 per unit of volatility. If you would invest 6,651 in McDonalds on October 9, 2024 and sell it today you would earn a total of 2,243 from holding McDonalds or generate 33.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Devon Energy vs. McDonalds
Performance |
| Timeline |
| Devon Energy |
| McDonalds |
Devon Energy and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Devon Energy and McDonalds
The main advantage of trading using opposite Devon Energy and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, McDonalds 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 McDonalds will offset losses from the drop in McDonalds' long position.| Devon Energy vs. Roper Technologies, | Devon Energy vs. Brpr Corporate Offices | Devon Energy vs. salesforce inc | Devon Energy vs. Paycom Software |
| McDonalds vs. American Airlines Group | McDonalds vs. United Natural Foods, | McDonalds vs. United Airlines Holdings | McDonalds vs. T Mobile |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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