Correlation Between Devon Energy and Capricorn Energy
Can any of the company-specific risk be diversified away by investing in both Devon Energy and Capricorn 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 Capricorn 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 Capricorn Energy PLC, you can compare the effects of market volatilities on Devon Energy and Capricorn 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 Capricorn Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Devon Energy and Capricorn Energy.
Diversification Opportunities for Devon Energy and Capricorn Energy
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Devon and Capricorn is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Capricorn Energy PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricorn Energy PLC 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 Capricorn Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricorn Energy PLC has no effect on the direction of Devon Energy i.e., Devon Energy and Capricorn Energy go up and down completely randomly.
Pair Corralation between Devon Energy and Capricorn Energy
Considering the 90-day investment horizon Devon Energy is expected to under-perform the Capricorn Energy. But the stock apears to be less risky and, when comparing its historical volatility, Devon Energy is 1.53 times less risky than Capricorn Energy. The stock trades about -0.02 of its potential returns per unit of risk. The Capricorn Energy PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 553.00 in Capricorn Energy PLC on August 30, 2024 and sell it today you would earn a total of 17.00 from holding Capricorn Energy PLC or generate 3.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Devon Energy vs. Capricorn Energy PLC
Performance |
| Timeline |
| Devon Energy |
| Capricorn Energy PLC |
Devon Energy and Capricorn Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Devon Energy and Capricorn Energy
The main advantage of trading using opposite Devon Energy and Capricorn Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, Capricorn 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 Capricorn Energy will offset losses from the drop in Capricorn Energy's long position.| Devon Energy vs. Coterra Energy | Devon Energy vs. Diamondback Energy | Devon Energy vs. EOG Resources | Devon Energy vs. ConocoPhillips |
| Capricorn Energy vs. San Leon Energy | Capricorn Energy vs. Tullow Oil PLC | Capricorn Energy vs. Dno ASA | Capricorn Energy vs. PetroShale |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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