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
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between EOG and Devon is 0.09. 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
Considering the 90-day investment horizon EOG Resources is expected to generate 0.92 times more return on investment than Devon Energy. However, EOG Resources is 1.09 times less risky than Devon Energy. It trades about 0.05 of its potential returns per unit of risk. Devon Energy is currently generating about -0.02 per unit of risk. If you would invest 11,858 in EOG Resources on August 27, 2024 and sell it today you would earn a total of 1,777 from holding EOG Resources or generate 14.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| 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. Permian Resources | EOG Resources vs. Devon Energy | EOG Resources vs. Coterra Energy | EOG Resources vs. Marathon Oil |
| Devon Energy vs. Coterra Energy | Devon Energy vs. Diamondback Energy | Devon Energy vs. EOG Resources | Devon Energy vs. ConocoPhillips |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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