Correlation Between Devon Energy and Diamondback Energy
Can any of the company-specific risk be diversified away by investing in both Devon Energy and Diamondback 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 Diamondback 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 Diamondback Energy, you can compare the effects of market volatilities on Devon Energy and Diamondback 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 Diamondback Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Devon Energy and Diamondback Energy.
Diversification Opportunities for Devon Energy and Diamondback Energy
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Devon and Diamondback is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Diamondback Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondback 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 Diamondback Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondback Energy has no effect on the direction of Devon Energy i.e., Devon Energy and Diamondback Energy go up and down completely randomly.
Pair Corralation between Devon Energy and Diamondback Energy
Considering the 90-day investment horizon Devon Energy is expected to under-perform the Diamondback Energy. But the stock apears to be less risky and, when comparing its historical volatility, Devon Energy is 1.18 times less risky than Diamondback Energy. The stock trades about -0.02 of its potential returns per unit of risk. The Diamondback Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 17,731 in Diamondback Energy on August 27, 2024 and sell it today you would earn a total of 224.00 from holding Diamondback Energy or generate 1.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Devon Energy vs. Diamondback Energy
Performance |
| Timeline |
| Devon Energy |
| Diamondback Energy |
Devon Energy and Diamondback Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Devon Energy and Diamondback Energy
The main advantage of trading using opposite Devon Energy and Diamondback Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, Diamondback 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 Diamondback Energy will offset losses from the drop in Diamondback Energy's long position.| Devon Energy vs. Coterra Energy | Devon Energy vs. Diamondback Energy | Devon Energy vs. EOG Resources | Devon Energy vs. ConocoPhillips |
| Diamondback Energy vs. Devon Energy | Diamondback Energy vs. Coterra Energy | Diamondback Energy vs. EOG Resources | Diamondback Energy vs. ConocoPhillips |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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