Correlation Between Whiting Petroleum and Devon Energy

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

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

Diversification Opportunities for Whiting Petroleum and Devon Energy

0.71

Correlation Coefficient

Whiting Petroleum  Devon Energy

Poor diversification

The 3 months correlation between Whiting and Devon is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Whiting Petroleum and Devon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Devon Energy and Whiting Petroleum 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 Whiting Petroleum 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 Whiting Petroleum i.e., Whiting Petroleum and Devon Energy go up and down completely randomly.

Pair Corralation between Whiting Petroleum and Devon Energy

Assuming the 90 days horizon Whiting Petroleum is expected to under-perform the Devon Energy. In addition to that, Whiting Petroleum is 6.88 times more volatile than Devon Energy. It trades about -0.06 of its total potential returns per unit of risk. Devon Energy is currently generating about -0.19 per unit of volatility. If you would invest  3,862  in Devon Energy on October 9, 2024 and sell it today you would lose (487.00) from holding Devon Energy or give up 12.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.5%
Values	Daily Returns

Whiting Petroleum  vs.  Devon Energy

Whiting Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whiting Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Whiting Petroleum and Devon Energy

The main advantage of trading using opposite Whiting Petroleum and Devon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whiting Petroleum 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 Whiting Petroleum 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.