Correlation Between Devon Energy and Microsoft
Can any of the company-specific risk be diversified away by investing in both Devon Energy and Microsoft 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 Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Devon Energy and Microsoft, you can compare the effects of market volatilities on Devon Energy and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Devon Energy and Microsoft.
Diversification Opportunities for Devon Energy and Microsoft
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Devon and Microsoft is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Devon Energy i.e., Devon Energy and Microsoft go up and down completely randomly.
Pair Corralation between Devon Energy and Microsoft
Assuming the 90 days trading horizon Devon Energy is expected to under-perform the Microsoft. In addition to that, Devon Energy is 1.15 times more volatile than Microsoft. It trades about -0.03 of its total potential returns per unit of risk. Microsoft is currently generating about 0.05 per unit of volatility. If you would invest 9,275 in Microsoft on August 23, 2024 and sell it today you would earn a total of 775.00 from holding Microsoft or generate 8.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Devon Energy vs. Microsoft
Performance |
| Timeline |
| Devon Energy |
| Microsoft |
Devon Energy and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Devon Energy and Microsoft
The main advantage of trading using opposite Devon Energy and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Devon Energy vs. Align Technology | Devon Energy vs. Paycom Software | Devon Energy vs. Agilent Technologies | Devon Energy vs. Lupatech SA |
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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 the Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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