Correlation Between Gulfport Energy and Devon Energy

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

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

Diversification Opportunities for Gulfport Energy and Devon Energy

0.38

Correlation Coefficient

Gulfport Energy  Devon Energy

Weak diversification

The 3 months correlation between Gulfport and Devon is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Gulfport Energy Operating and Devon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Devon Energy and Gulfport 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 Gulfport Energy Operating are associated (or correlated) with Devon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Devon Energy has no effect on the direction of Gulfport Energy i.e., Gulfport Energy and Devon Energy go up and down completely randomly.

Pair Corralation between Gulfport Energy and Devon Energy

Given the investment horizon of 90 days Gulfport Energy Operating is expected to generate 1.0 times more return on investment than Devon Energy. However, Gulfport Energy Operating is 1.0 times less risky than Devon Energy. It trades about -0.01 of its potential returns per unit of risk. Devon Energy is currently generating about -0.04 per unit of risk. If you would invest  17,580  in Gulfport Energy Operating on November 28, 2024 and sell it today you would lose (371.00) from holding Gulfport Energy Operating or give up 2.11% of portfolio value over 90 days.

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

Gulfport Energy Operating  vs.  Devon Energy

Gulfport Energy Operating

Risk-Adjusted Performance

Weak

Over the last 90 days Gulfport Energy Operating has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Gulfport Energy is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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.

Pair Trading with Gulfport Energy and Devon Energy

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

The idea behind Gulfport Energy Operating and Devon Energy 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.