Correlation Between Devon Energy and Arrow Exploration
Can any of the company-specific risk be diversified away by investing in both Devon Energy and Arrow Exploration 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 Arrow Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Devon Energy and Arrow Exploration Corp, you can compare the effects of market volatilities on Devon Energy and Arrow Exploration 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 Arrow Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Devon Energy and Arrow Exploration.
Diversification Opportunities for Devon Energy and Arrow Exploration
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Devon and Arrow is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Arrow Exploration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Exploration Corp 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 Arrow Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Exploration Corp has no effect on the direction of Devon Energy i.e., Devon Energy and Arrow Exploration go up and down completely randomly.
Pair Corralation between Devon Energy and Arrow Exploration
Considering the 90-day investment horizon Devon Energy is expected to under-perform the Arrow Exploration. But the stock apears to be less risky and, when comparing its historical volatility, Devon Energy is 2.99 times less risky than Arrow Exploration. The stock trades about -0.04 of its potential returns per unit of risk. The Arrow Exploration Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 21.00 in Arrow Exploration Corp on August 31, 2024 and sell it today you would earn a total of 8.00 from holding Arrow Exploration Corp or generate 38.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Devon Energy vs. Arrow Exploration Corp
Performance |
| Timeline |
| Devon Energy |
| Arrow Exploration Corp |
Devon Energy and Arrow Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Devon Energy and Arrow Exploration
The main advantage of trading using opposite Devon Energy and Arrow Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, Arrow Exploration 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 Arrow Exploration will offset losses from the drop in Arrow Exploration's long position.| Devon Energy vs. Coterra Energy | Devon Energy vs. Diamondback Energy | Devon Energy vs. EOG Resources | Devon Energy vs. ConocoPhillips |
| Arrow Exploration vs. Permian Resources | Arrow Exploration vs. Devon Energy | Arrow Exploration vs. EOG Resources | Arrow Exploration 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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