Correlation Between Devon Energy and APA

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

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

Diversification Opportunities for Devon Energy and APA

0.59

Correlation Coefficient

Devon Energy  APA

Very weak diversification

The 3 months correlation between Devon and APA is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and APA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APA Corporation 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 APA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APA Corporation has no effect on the direction of Devon Energy i.e., Devon Energy and APA go up and down completely randomly.

Pair Corralation between Devon Energy and APA

Assuming the 90 days trading horizon Devon Energy is expected to under-perform the APA. But the stock apears to be less risky and, when comparing its historical volatility, Devon Energy is 1.11 times less risky than APA. The stock trades about -0.41 of its potential returns per unit of risk. The APA Corporation is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  13,130  in APA Corporation on September 23, 2024 and sell it today you would lose (676.00) from holding APA Corporation or give up 5.15% of portfolio value over 90 days.

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

Devon Energy  vs.  APA Corp.

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

APA Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APA Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, APA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Devon Energy and APA

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

The idea behind Devon Energy and APA Corporation 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.