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

0.89

Correlation Coefficient

Devon Energy  Hess

Very poor diversification

The 3 months correlation between Devon and Hess is 0.89. 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

Considering the 90-day investment horizon Devon Energy is expected to under-perform the Hess. In addition to that, Devon Energy is 1.52 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  14,666  in Hess Corporation on November 28, 2024 and sell it today you would earn a total of  29.00  from holding Hess Corporation or generate 0.2% return on investment over 90 days.

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

Devon Energy  vs.  Hess Corp.

Devon Energy

Risk-Adjusted Performance

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 very healthy basic indicators, Devon Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Hess

Risk-Adjusted Performance

Weak

Over the last 90 days Hess Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Hess is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.