Correlation Between Devon Energy and Murphy Oil
Can any of the company-specific risk be diversified away by investing in both Devon Energy and Murphy 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 Murphy 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 Murphy Oil, you can compare the effects of market volatilities on Devon Energy and Murphy 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 Murphy Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Devon Energy and Murphy Oil.
Diversification Opportunities for Devon Energy and Murphy Oil
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Devon and Murphy is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Murphy Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murphy 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 Murphy Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murphy Oil has no effect on the direction of Devon Energy i.e., Devon Energy and Murphy Oil go up and down completely randomly.
Pair Corralation between Devon Energy and Murphy Oil
Considering the 90-day investment horizon Devon Energy is expected to generate 2.48 times less return on investment than Murphy Oil. But when comparing it to its historical volatility, Devon Energy is 1.31 times less risky than Murphy Oil. It trades about 0.08 of its potential returns per unit of risk. Murphy Oil is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3,157 in Murphy Oil on August 27, 2024 and sell it today you would earn a total of 183.00 from holding Murphy Oil or generate 5.8% 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. Murphy Oil
Performance |
| Timeline |
| Devon Energy |
| Murphy Oil |
Devon Energy and Murphy Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Devon Energy and Murphy Oil
The main advantage of trading using opposite Devon Energy and Murphy Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, Murphy 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 Murphy Oil will offset losses from the drop in Murphy Oil's long position.| Devon Energy vs. Coterra Energy | Devon Energy vs. Diamondback Energy | Devon Energy vs. EOG Resources | Devon Energy vs. ConocoPhillips |
| Murphy Oil vs. Matador Resources | Murphy Oil vs. Civitas Resources | Murphy Oil vs. Magnolia Oil Gas | Murphy Oil vs. SM Energy Co |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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