Correlation Between Devon Energy and Black Dragon

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

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

Diversification Opportunities for Devon Energy and Black Dragon

0.0

Correlation Coefficient

Devon Energy  Black Dragon

Pay attention - limited upside

The 3 months correlation between Devon and Black is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Black Dragon Resource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Dragon Resource 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 Black Dragon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Dragon Resource has no effect on the direction of Devon Energy i.e., Devon Energy and Black Dragon go up and down completely randomly.

Pair Corralation between Devon Energy and Black Dragon

Considering the 90-day investment horizon Devon Energy is expected to generate 0.08 times more return on investment than Black Dragon. However, Devon Energy is 12.85 times less risky than Black Dragon. It trades about -0.31 of its potential returns per unit of risk. Black Dragon Resource is currently generating about -0.21 per unit of risk. If you would invest  3,834  in Devon Energy on September 13, 2024 and sell it today you would lose (421.00) from holding Devon Energy or give up 10.98% of portfolio value over 90 days.

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

Devon Energy  vs.  Black Dragon Resource

Devon Energy

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Devon Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Black Dragon Resource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Dragon Resource has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Devon Energy and Black Dragon

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

The idea behind Devon Energy and Black Dragon Resource 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.