Correlation Between Diamondback Energy and Devon Energy
Can any of the company-specific risk be diversified away by investing in both Diamondback Energy 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 Diamondback Energy and Devon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamondback Energy and Devon Energy, you can compare the effects of market volatilities on Diamondback Energy 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 Diamondback Energy with a short position of Devon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamondback Energy and Devon Energy.
Diversification Opportunities for Diamondback Energy and Devon Energy
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Diamondback and Devon is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Diamondback Energy and Devon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Devon Energy and Diamondback 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 Diamondback Energy 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 Diamondback Energy i.e., Diamondback Energy and Devon Energy go up and down completely randomly.
Pair Corralation between Diamondback Energy and Devon Energy
Given the investment horizon of 90 days Diamondback Energy is expected to generate 1.2 times more return on investment than Devon Energy. However, Diamondback Energy is 1.2 times more volatile than Devon Energy. It trades about 0.13 of its potential returns per unit of risk. Devon Energy is currently generating about 0.08 per unit of risk. If you would invest 17,731 in Diamondback Energy on August 27, 2024 and sell it today you would earn a total of 798.00 from holding Diamondback Energy or generate 4.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamondback Energy vs. Devon Energy
Performance |
| Timeline |
| Diamondback Energy |
| Devon Energy |
Diamondback Energy and Devon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamondback Energy and Devon Energy
The main advantage of trading using opposite Diamondback Energy and Devon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamondback Energy 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.| Diamondback Energy vs. Devon Energy | Diamondback Energy vs. Coterra Energy | Diamondback Energy vs. EOG Resources | Diamondback Energy vs. ConocoPhillips |
| 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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