Correlation Between United Airlines and Devon Energy
Can any of the company-specific risk be diversified away by investing in both United Airlines 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 United Airlines and Devon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Airlines Holdings and Devon Energy, you can compare the effects of market volatilities on United Airlines 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 United Airlines with a short position of Devon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Devon Energy.
Diversification Opportunities for United Airlines and Devon Energy
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Devon is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Devon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Devon Energy and United Airlines 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 United Airlines Holdings 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 United Airlines i.e., United Airlines and Devon Energy go up and down completely randomly.
Pair Corralation between United Airlines and Devon Energy
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 1.49 times more return on investment than Devon Energy. However, United Airlines is 1.49 times more volatile than Devon Energy. It trades about 0.16 of its potential returns per unit of risk. Devon Energy is currently generating about -0.27 per unit of risk. If you would invest 181,488 in United Airlines Holdings on September 12, 2024 and sell it today you would earn a total of 15,512 from holding United Airlines Holdings or generate 8.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Airlines Holdings vs. Devon Energy
Performance |
| Timeline |
| United Airlines Holdings |
| Devon Energy |
United Airlines and Devon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Devon Energy
The main advantage of trading using opposite United Airlines and Devon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines 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.| United Airlines vs. Delta Air Lines | United Airlines vs. Southwest Airlines | United Airlines vs. Controladora Vuela Compaa |
| Devon Energy vs. Monster Beverage Corp | Devon Energy vs. Capital One Financial | Devon Energy vs. Grupo Sports World | Devon Energy vs. FibraHotel |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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