Correlation Between Clover Health and Devon Energy

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

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

Diversification Opportunities for Clover Health and Devon Energy

0.52

Correlation Coefficient

Clover Health  Devon Energy

Very weak diversification

The 3 months correlation between Clover and Devon is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Clover Health Investments, and Devon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Devon Energy and Clover Health 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 Clover Health Investments, 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 Clover Health i.e., Clover Health and Devon Energy go up and down completely randomly.

Pair Corralation between Clover Health and Devon Energy

Assuming the 90 days trading horizon Clover Health Investments, is expected to generate 1.86 times more return on investment than Devon Energy. However, Clover Health is 1.86 times more volatile than Devon Energy. It trades about 0.09 of its potential returns per unit of risk. Devon Energy is currently generating about 0.02 per unit of risk. If you would invest  2,100  in Clover Health Investments, on October 23, 2024 and sell it today you would earn a total of  328.00  from holding Clover Health Investments, or generate 15.62% return on investment over 90 days.

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

Clover Health Investments,  vs.  Devon Energy

Clover Health Invest

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clover Health Investments, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clover Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Devon Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Devon Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Devon Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Clover Health and Devon Energy

The main advantage of trading using opposite Clover Health and Devon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clover Health 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 Clover Health Investments, 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.