Correlation Between EOG Resources and Devon Energy
Can any of the company-specific risk be diversified away by investing in both EOG Resources and Devon 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 EOG Resources and Devon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EOG Resources and Devon Energy, you can compare the effects of market volatilities on EOG Resources and Devon 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 EOG Resources with a short position of Devon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of EOG Resources and Devon Energy.
Diversification Opportunities for EOG Resources and Devon Energy
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between EOG and Devon is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding EOG Resources and Devon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Devon Energy and EOG Resources 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 EOG Resources are associated (or correlated) with Devon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Devon Energy has no effect on the direction of EOG Resources i.e., EOG Resources and Devon Energy go up and down completely randomly.
Pair Corralation between EOG Resources and Devon Energy
Assuming the 90 days trading horizon EOG Resources is expected to under-perform the Devon Energy. But the stock apears to be less risky and, when comparing its historical volatility, EOG Resources is 4.67 times less risky than Devon Energy. The stock trades about -0.24 of its potential returns per unit of risk. The Devon Energy is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 20,520 in Devon Energy on October 14, 2024 and sell it today you would earn a total of 1,509 from holding Devon Energy or generate 7.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EOG Resources vs. Devon Energy
Performance |
| Timeline |
| EOG Resources |
| Devon Energy |
EOG Resources and Devon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EOG Resources and Devon Energy
The main advantage of trading using opposite EOG Resources and Devon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EOG Resources position performs unexpectedly, Devon 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 Devon Energy will offset losses from the drop in Devon Energy's long position.| EOG Resources vs. Occidental Petroleum | EOG Resources vs. Devon Energy | EOG Resources vs. Diamondback Energy, | EOG Resources vs. APA Corporation |
| Devon Energy vs. Zoom Video Communications | Devon Energy vs. Beyond Meat | Devon Energy vs. Marfrig Global Foods | Devon Energy vs. Broadcom |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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