Correlation Between Devon Energy and Chevron Corp

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Can any of the company-specific risk be diversified away by investing in both Devon Energy and Chevron Corp 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 Chevron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Devon Energy Corp and Chevron Corp, you can compare the effects of market volatilities on Devon Energy and Chevron Corp 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 Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Devon Energy and Chevron Corp.

Diversification Opportunities for Devon Energy and Chevron Corp

0.95
  Correlation Coefficient

Almost no diversification

The 1 month correlation between Devon and Chevron is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy Corp and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Corp are associated (or correlated) with Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Devon Energy i.e., Devon Energy and Chevron Corp go up and down completely randomly.

Pair Corralation between Devon Energy and Chevron Corp

Considering the 90-day investment horizon Devon Energy Corp is expected to generate 1.64 times more return on investment than Chevron Corp. However, Devon Energy is 1.64 times more volatile than Chevron Corp. It trades about 0.0 of its potential returns per unit of risk. Chevron Corp is currently generating about -0.05 per unit of risk. If you would invest  6,954  in Devon Energy Corp on July 6, 2022 and sell it today you would lose (107.00)  from holding Devon Energy Corp or give up 1.54% of portfolio value over 90 days.
Time Period1 Month [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Devon Energy Corp  vs.  Chevron Corp

 Performance (%) 
       Timeline  
Devon Energy Corp 
Devon Performance
0 of 100
Over the last 90 days Devon Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Devon Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Devon Price Channel

Chevron Corp 
Chevron Performance
0 of 100
Over the last 90 days Chevron Corp 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Chevron Price Channel

Devon Energy and Chevron Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Devon Energy and Chevron Corp

The main advantage of trading using opposite Devon Energy and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, Chevron Corp 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.
Devon Energy vs. Amazon Inc
The idea behind Devon Energy Corp and Chevron Corp 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.
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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