Correlation Between Patria Investments and Devon Energy

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

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

Diversification Opportunities for Patria Investments and Devon Energy

-0.58

Correlation Coefficient

Patria Investments  Devon Energy

Excellent diversification

The 3 months correlation between Patria and Devon is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Patria Investments Limited and Devon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Devon Energy and Patria Investments 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 Patria Investments Limited 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 Patria Investments i.e., Patria Investments and Devon Energy go up and down completely randomly.

Pair Corralation between Patria Investments and Devon Energy

Assuming the 90 days trading horizon Patria Investments Limited is expected to generate 0.85 times more return on investment than Devon Energy. However, Patria Investments Limited is 1.18 times less risky than Devon Energy. It trades about 0.21 of its potential returns per unit of risk. Devon Energy is currently generating about -0.08 per unit of risk. If you would invest  2,950  in Patria Investments Limited on October 8, 2024 and sell it today you would earn a total of  618.00  from holding Patria Investments Limited or generate 20.95% return on investment over 90 days.

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

Patria Investments Limited  vs.  Devon Energy

Patria Investments

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Investments Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Patria Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Patria Investments and Devon Energy

The main advantage of trading using opposite Patria Investments and Devon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patria Investments 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 Patria Investments Limited 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.