Correlation Between Devon Energy and Hess

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

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

Diversification Opportunities for Devon Energy and Hess

-0.88

Correlation Coefficient

Devon Energy  Hess

Pay attention - limited upside

The 3 months correlation between Devon and Hess is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Hess Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess 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 Hess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess has no effect on the direction of Devon Energy i.e., Devon Energy and Hess go up and down completely randomly.

Pair Corralation between Devon Energy and Hess

Assuming the 90 days trading horizon Devon Energy is expected to under-perform the Hess. In addition to that, Devon Energy is 1.7 times more volatile than Hess Corporation. It trades about -0.03 of its total potential returns per unit of risk. Hess Corporation is currently generating about 0.01 per unit of volatility. If you would invest  38,069  in Hess Corporation on October 4, 2024 and sell it today you would lose (145.00) from holding Hess Corporation or give up 0.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.19%
Values	Daily Returns

Devon Energy  vs.  Hess 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 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.

Hess

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Hess 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 Hess

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

The idea behind Devon Energy and Hess 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.