Correlation Between Devon Energy and Barrel Energy
Can any of the company-specific risk be diversified away by investing in both Devon Energy and Barrel Energy 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 Barrel Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Devon Energy and Barrel Energy, you can compare the effects of market volatilities on Devon Energy and Barrel Energy 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 Barrel Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Devon Energy and Barrel Energy.
Diversification Opportunities for Devon Energy and Barrel Energy
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Devon and Barrel is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Barrel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barrel Energy 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 Barrel Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barrel Energy has no effect on the direction of Devon Energy i.e., Devon Energy and Barrel Energy go up and down completely randomly.
Pair Corralation between Devon Energy and Barrel Energy
Considering the 90-day investment horizon Devon Energy is expected to under-perform the Barrel Energy. But the stock apears to be less risky and, when comparing its historical volatility, Devon Energy is 9.15 times less risky than Barrel Energy. The stock trades about -0.03 of its potential returns per unit of risk. The Barrel Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 0.26 in Barrel Energy on August 31, 2024 and sell it today you would lose (0.03) from holding Barrel Energy or give up 11.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Devon Energy vs. Barrel Energy
Performance |
| Timeline |
| Devon Energy |
| Barrel Energy |
Devon Energy and Barrel Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Devon Energy and Barrel Energy
The main advantage of trading using opposite Devon Energy and Barrel Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, Barrel Energy 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 Barrel Energy will offset losses from the drop in Barrel Energy's long position.| Devon Energy vs. Coterra Energy | Devon Energy vs. Diamondback Energy | Devon Energy vs. EOG Resources | Devon Energy vs. ConocoPhillips |
| Barrel Energy vs. Permian Resources | Barrel Energy vs. Devon Energy | Barrel Energy vs. EOG Resources | Barrel Energy vs. Coterra Energy |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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