Correlation Between Devon Energy and Marathon Oil
Can any of the company-specific risk be diversified away by investing in both Devon Energy and Marathon Oil 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 Marathon Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Devon Energy and Marathon Oil, you can compare the effects of market volatilities on Devon Energy and Marathon Oil 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 Marathon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Devon Energy and Marathon Oil.
Diversification Opportunities for Devon Energy and Marathon Oil
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Devon and Marathon is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Marathon Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Oil 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 Marathon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Oil has no effect on the direction of Devon Energy i.e., Devon Energy and Marathon Oil go up and down completely randomly.
Pair Corralation between Devon Energy and Marathon Oil
Considering the 90-day investment horizon Devon Energy is expected to under-perform the Marathon Oil. But the stock apears to be less risky and, when comparing its historical volatility, Devon Energy is 1.04 times less risky than Marathon Oil. The stock trades about -0.02 of its potential returns per unit of risk. The Marathon Oil is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,490 in Marathon Oil on August 24, 2024 and sell it today you would earn a total of 365.00 from holding Marathon Oil or generate 14.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Devon Energy vs. Marathon Oil
Performance |
| Timeline |
| Devon Energy |
| Marathon Oil |
Devon Energy and Marathon Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Devon Energy and Marathon Oil
The main advantage of trading using opposite Devon Energy and Marathon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, Marathon Oil 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 Marathon Oil will offset losses from the drop in Marathon Oil's long position.| Devon Energy vs. Coterra Energy | Devon Energy vs. Diamondback Energy | Devon Energy vs. EOG Resources | Devon Energy vs. ConocoPhillips |
| Marathon Oil vs. EOG Resources | Marathon Oil vs. Diamondback Energy | Marathon Oil vs. Hess Corporation | Marathon Oil vs. Devon 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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