Correlation Between Devon Energy and New Frontier
Can any of the company-specific risk be diversified away by investing in both Devon Energy and New Frontier 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 New Frontier into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Devon Energy and New Frontier Energy, you can compare the effects of market volatilities on Devon Energy and New Frontier 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 New Frontier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Devon Energy and New Frontier.
Diversification Opportunities for Devon Energy and New Frontier
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Devon and New is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and New Frontier Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Frontier 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 New Frontier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Frontier Energy has no effect on the direction of Devon Energy i.e., Devon Energy and New Frontier go up and down completely randomly.
Pair Corralation between Devon Energy and New Frontier
Considering the 90-day investment horizon Devon Energy is expected to generate 0.26 times more return on investment than New Frontier. However, Devon Energy is 3.84 times less risky than New Frontier. It trades about -0.03 of its potential returns per unit of risk. New Frontier Energy is currently generating about -0.06 per unit of risk. If you would invest 5,750 in Devon Energy on August 27, 2024 and sell it today you would lose (1,805) from holding Devon Energy or give up 31.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Devon Energy vs. New Frontier Energy
Performance |
| Timeline |
| Devon Energy |
| New Frontier Energy |
Devon Energy and New Frontier Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Devon Energy and New Frontier
The main advantage of trading using opposite Devon Energy and New Frontier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, New Frontier 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 New Frontier will offset losses from the drop in New Frontier's long position.| Devon Energy vs. Coterra Energy | Devon Energy vs. Diamondback Energy | Devon Energy vs. EOG Resources | Devon Energy vs. ConocoPhillips |
| New Frontier vs. Permian Resources | New Frontier vs. Devon Energy | New Frontier vs. EOG Resources | New Frontier 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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