Correlation Between Devon Energy and Range Resources

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

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

Diversification Opportunities for Devon Energy and Range Resources

-0.47

Correlation Coefficient

Devon Energy  Range Resources

Very good diversification

The 3 months correlation between Devon and Range is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Range Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Range Resources Corp 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 Range Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Range Resources Corp has no effect on the direction of Devon Energy i.e., Devon Energy and Range Resources go up and down completely randomly.

Pair Corralation between Devon Energy and Range Resources

Considering the 90-day investment horizon Devon Energy is expected to under-perform the Range Resources. But the stock apears to be less risky and, when comparing its historical volatility, Devon Energy is 1.14 times less risky than Range Resources. The stock trades about -0.1 of its potential returns per unit of risk. The Range Resources Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,883  in Range Resources Corp on September 1, 2024 and sell it today you would earn a total of  691.00  from holding Range Resources Corp or generate 23.97% return on investment over 90 days.

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

Devon Energy  vs.  Range Resources 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. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Range Resources Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Range Resources Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Range Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Devon Energy and Range Resources

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

The idea behind Devon Energy and Range Resources Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.