Correlation Between Devon Energy and Enauta Participaes

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

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

Diversification Opportunities for Devon Energy and Enauta Participaes

0.79

Correlation Coefficient

Devon Energy  Enauta Participaes

Poor diversification

The 3 months correlation between Devon and Enauta is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Devon Energy and Enauta Participaes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enauta Participaes 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 Enauta Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enauta Participaes has no effect on the direction of Devon Energy i.e., Devon Energy and Enauta Participaes go up and down completely randomly.

Pair Corralation between Devon Energy and Enauta Participaes

Assuming the 90 days trading horizon Devon Energy is expected to generate 3.0 times less return on investment than Enauta Participaes. But when comparing it to its historical volatility, Devon Energy is 2.19 times less risky than Enauta Participaes. It trades about 0.1 of its potential returns per unit of risk. Enauta Participaes SA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,751  in Enauta Participaes SA on February 1, 2024 and sell it today you would earn a total of  1,070  from holding Enauta Participaes SA or generate 61.11% return on investment over 90 days.

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

Devon Energy  vs.  Enauta Participaes SA

Devon Energy

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Devon Energy are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Devon Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Enauta Participaes

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enauta Participaes SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Enauta Participaes unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Devon Energy and Enauta Participaes

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

The idea behind Devon Energy and Enauta Participaes SA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.