Correlation Between Devon Energy and Pioneer Natural

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

Diversification Opportunities for Devon Energy and Pioneer Natural

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Devon and Pioneer is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Pioneer Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Natural Resources 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 Pioneer Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Natural Resources has no effect on the direction of Devon Energy i.e., Devon Energy and Pioneer Natural go up and down completely randomly.

Pair Corralation between Devon Energy and Pioneer Natural

Considering the 90-day investment horizon Devon Energy is expected to generate 1.02 times less return on investment than Pioneer Natural. In addition to that, Devon Energy is 1.11 times more volatile than Pioneer Natural Resources. It trades about 0.61 of its total potential returns per unit of risk. Pioneer Natural Resources is currently generating about 0.69 per unit of volatility. If you would invest  23,121  in Pioneer Natural Resources on December 29, 2023 and sell it today you would earn a total of  2,879  from holding Pioneer Natural Resources or generate 12.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Devon Energy  vs.  Pioneer Natural Resources

 Performance 
       Timeline  
Devon Energy 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Devon Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Devon Energy may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Pioneer Natural Resources 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Natural Resources are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Pioneer Natural exhibited solid returns over the last few months and may actually be approaching a breakup point.

Devon Energy and Pioneer Natural Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Devon Energy and Pioneer Natural

The main advantage of trading using opposite Devon Energy and Pioneer Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Devon Energy position performs unexpectedly, Pioneer Natural 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 Pioneer Natural will offset losses from the drop in Pioneer Natural's long position.
The idea behind Devon Energy and Pioneer Natural Resources 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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