Correlation Between Devon Energy and Pieridae Energy

Can any of the company-specific risk be diversified away by investing in both Devon Energy and Pieridae 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 Devon Energy and Pieridae Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Devon Energy and Pieridae Energy Limited, you can compare the effects of market volatilities on Devon Energy and Pieridae 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 Devon Energy with a short position of Pieridae Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Devon Energy and Pieridae Energy.

Diversification Opportunities for Devon Energy and Pieridae Energy

0.66

Correlation Coefficient

Devon Energy  Pieridae Energy

Poor diversification

The 3 months correlation between Devon and Pieridae is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Pieridae Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pieridae Energy and Devon 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 Devon Energy are associated (or correlated) with Pieridae Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pieridae Energy has no effect on the direction of Devon Energy i.e., Devon Energy and Pieridae Energy go up and down completely randomly.

Pair Corralation between Devon Energy and Pieridae Energy

Considering the 90-day investment horizon Devon Energy is expected to under-perform the Pieridae Energy. But the stock apears to be less risky and, when comparing its historical volatility, Devon Energy is 4.54 times less risky than Pieridae Energy. The stock trades about -0.05 of its potential returns per unit of risk. The Pieridae Energy Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Pieridae Energy Limited on September 1, 2024 and sell it today you would lose (1.00) from holding Pieridae Energy Limited or give up 5.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Devon Energy  vs.  Pieridae Energy Limited

Devon Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Devon Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pieridae Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pieridae Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Devon Energy and Pieridae Energy

The main advantage of trading using opposite Devon Energy and Pieridae Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, Pieridae 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 Pieridae Energy will offset losses from the drop in Pieridae Energy's long position.

The idea behind Devon Energy and Pieridae Energy Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.