Correlation Between Devon Energy and Tullow Oil
Can any of the company-specific risk be diversified away by investing in both Devon Energy and Tullow 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 Tullow 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 Tullow Oil PLC, you can compare the effects of market volatilities on Devon Energy and Tullow 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 Tullow Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Devon Energy and Tullow Oil.
Diversification Opportunities for Devon Energy and Tullow Oil
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Devon and Tullow is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Tullow Oil PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tullow Oil PLC 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 Tullow Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tullow Oil PLC has no effect on the direction of Devon Energy i.e., Devon Energy and Tullow Oil go up and down completely randomly.
Pair Corralation between Devon Energy and Tullow Oil
Considering the 90-day investment horizon Devon Energy is expected to under-perform the Tullow Oil. But the stock apears to be less risky and, when comparing its historical volatility, Devon Energy is 3.51 times less risky than Tullow Oil. The stock trades about -0.11 of its potential returns per unit of risk. The Tullow Oil PLC is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 20.00 in Tullow Oil PLC on September 3, 2024 and sell it today you would lose (7.00) from holding Tullow Oil PLC or give up 35.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Devon Energy vs. Tullow Oil PLC
Performance |
| Timeline |
| Devon Energy |
| Tullow Oil PLC |
Devon Energy and Tullow Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Devon Energy and Tullow Oil
The main advantage of trading using opposite Devon Energy and Tullow Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, Tullow 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 Tullow Oil will offset losses from the drop in Tullow Oil's long position.| Devon Energy vs. Coterra Energy | Devon Energy vs. Diamondback Energy | Devon Energy vs. EOG Resources | Devon Energy vs. ConocoPhillips |
| Tullow Oil vs. San Leon Energy | Tullow Oil vs. Dno ASA | Tullow Oil vs. PetroShale | Tullow Oil vs. Horizon Oil Limited |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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