Correlation Between Clave Indices and Devon Energy

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

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

Diversification Opportunities for Clave Indices and Devon Energy

0.8

Correlation Coefficient

Clave Indices  Devon Energy

Very poor diversification

The 3 months correlation between Clave and Devon is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Clave Indices De and Devon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Devon Energy and Clave Indices 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 Clave Indices De 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 Clave Indices i.e., Clave Indices and Devon Energy go up and down completely randomly.

Pair Corralation between Clave Indices and Devon Energy

Assuming the 90 days trading horizon Clave Indices De is expected to under-perform the Devon Energy. But the stock apears to be less risky and, when comparing its historical volatility, Clave Indices De is 1.16 times less risky than Devon Energy. The stock trades about -0.12 of its potential returns per unit of risk. The Devon Energy is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  22,632  in Devon Energy on October 7, 2024 and sell it today you would lose (1,703) from holding Devon Energy or give up 7.52% of portfolio value over 90 days.

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

Clave Indices De  vs.  Devon Energy

Clave Indices De

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clave Indices De has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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. Despite 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.

Pair Trading with Clave Indices and Devon Energy

The main advantage of trading using opposite Clave Indices and Devon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clave Indices 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.

The idea behind Clave Indices De and Devon Energy 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.