Correlation Between Tullow Oil and Devon Energy
Can any of the company-specific risk be diversified away by investing in both Tullow Oil 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 Tullow Oil and Devon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tullow Oil PLC and Devon Energy, you can compare the effects of market volatilities on Tullow Oil 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 Tullow Oil with a short position of Devon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tullow Oil and Devon Energy.
Diversification Opportunities for Tullow Oil and Devon Energy
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tullow and Devon is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Tullow Oil PLC and Devon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Devon Energy and Tullow Oil 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 Tullow Oil PLC 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 Tullow Oil i.e., Tullow Oil and Devon Energy go up and down completely randomly.
Pair Corralation between Tullow Oil and Devon Energy
Assuming the 90 days horizon Tullow Oil PLC is expected to under-perform the Devon Energy. In addition to that, Tullow Oil is 2.82 times more volatile than Devon Energy. It trades about -0.07 of its total potential returns per unit of risk. Devon Energy is currently generating about -0.12 per unit of volatility. If you would invest 3,915 in Devon Energy on September 4, 2024 and sell it today you would lose (154.00) from holding Devon Energy or give up 3.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Tullow Oil PLC vs. Devon Energy
Performance |
| Timeline |
| Tullow Oil PLC |
| Devon Energy |
Tullow Oil and Devon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tullow Oil and Devon Energy
The main advantage of trading using opposite Tullow Oil and Devon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tullow Oil 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.| Tullow Oil vs. CNX Resources Corp | Tullow Oil vs. MV Oil Trust | Tullow Oil vs. San Juan Basin | Tullow Oil vs. VOC Energy Trust |
| 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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