Correlation Between Devon Energy and Cabot Oil
Can any of the company-specific risk be diversified away by investing in both Devon Energy and Cabot Oil 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 Cabot Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Devon Energy and Cabot Oil Gas, you can compare the effects of market volatilities on Devon Energy and Cabot Oil 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 Cabot Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Devon Energy and Cabot Oil.
Diversification Opportunities for Devon Energy and Cabot Oil
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Devon and Cabot is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Cabot Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot Oil Gas 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 Cabot Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot Oil Gas has no effect on the direction of Devon Energy i.e., Devon Energy and Cabot Oil go up and down completely randomly.
Pair Corralation between Devon Energy and Cabot Oil
Assuming the 90 days trading horizon Devon Energy is expected to under-perform the Cabot Oil. In addition to that, Devon Energy is 1.26 times more volatile than Cabot Oil Gas. It trades about -0.03 of its total potential returns per unit of risk. Cabot Oil Gas is currently generating about 0.02 per unit of volatility. If you would invest 49,087 in Cabot Oil Gas on September 4, 2024 and sell it today you would earn a total of 5,213 from holding Cabot Oil Gas or generate 10.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Devon Energy vs. Cabot Oil Gas
Performance |
| Timeline |
| Devon Energy |
| Cabot Oil Gas |
Devon Energy and Cabot Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Devon Energy and Cabot Oil
The main advantage of trading using opposite Devon Energy and Cabot Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, Cabot Oil 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 Cabot Oil will offset losses from the drop in Cabot Oil's long position.| Devon Energy vs. The Bank of | Devon Energy vs. Lloyds Banking Group | Devon Energy vs. Grupo Sports World | Devon Energy vs. United Airlines Holdings |
| Cabot Oil vs. Micron Technology | Cabot Oil vs. Ameriprise Financial | Cabot Oil vs. United Airlines Holdings | Cabot Oil vs. Genworth 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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