Correlation Between Devon Energy and Kosmos Energy
Can any of the company-specific risk be diversified away by investing in both Devon Energy and Kosmos 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 Kosmos 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 Kosmos Energy, you can compare the effects of market volatilities on Devon Energy and Kosmos 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 Kosmos Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Devon Energy and Kosmos Energy.
Diversification Opportunities for Devon Energy and Kosmos Energy
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Devon and Kosmos is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Kosmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kosmos 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 Kosmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kosmos Energy has no effect on the direction of Devon Energy i.e., Devon Energy and Kosmos Energy go up and down completely randomly.
Pair Corralation between Devon Energy and Kosmos Energy
Considering the 90-day investment horizon Devon Energy is expected to generate 0.54 times more return on investment than Kosmos Energy. However, Devon Energy is 1.87 times less risky than Kosmos Energy. It trades about -0.01 of its potential returns per unit of risk. Kosmos Energy is currently generating about -0.06 per unit of risk. If you would invest 4,297 in Devon Energy on August 26, 2024 and sell it today you would lose (352.00) from holding Devon Energy or give up 8.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Devon Energy vs. Kosmos Energy
Performance |
| Timeline |
| Devon Energy |
| Kosmos Energy |
Devon Energy and Kosmos Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Devon Energy and Kosmos Energy
The main advantage of trading using opposite Devon Energy and Kosmos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, Kosmos 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 Kosmos Energy will offset losses from the drop in Kosmos Energy's long position.| Devon Energy vs. Coterra Energy | Devon Energy vs. Diamondback Energy | Devon Energy vs. EOG Resources | Devon Energy vs. ConocoPhillips |
| Kosmos Energy vs. Devon Energy | Kosmos Energy vs. ConocoPhillips | Kosmos Energy vs. Diamondback Energy | Kosmos Energy vs. Occidental Petroleum |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |