Correlation Between Devon Energy and Delek Drilling

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

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

Diversification Opportunities for Devon Energy and Delek Drilling

0.18

Correlation Coefficient

Devon Energy  Delek Drilling

Average diversification

The 3 months correlation between Devon and Delek is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Delek Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Drilling 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 Delek Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Drilling has no effect on the direction of Devon Energy i.e., Devon Energy and Delek Drilling go up and down completely randomly.

Pair Corralation between Devon Energy and Delek Drilling

Considering the 90-day investment horizon Devon Energy is expected to generate 0.53 times more return on investment than Delek Drilling. However, Devon Energy is 1.88 times less risky than Delek Drilling. It trades about 0.08 of its potential returns per unit of risk. Delek Drilling is currently generating about 0.04 per unit of risk. If you would invest  4,453  in Devon Energy on February 12, 2024 and sell it today you would earn a total of  559.00  from holding Devon Energy or generate 12.55% return on investment over 90 days.

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

Devon Energy  vs.  Delek Drilling

Devon Energy

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Devon Energy are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Devon Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Delek Drilling

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Drilling are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Delek Drilling is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Devon Energy and Delek Drilling

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

The idea behind Devon Energy and Delek Drilling 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.