Correlation Between Vital Energy and Devon Energy
Can any of the company-specific risk be diversified away by investing in both Vital 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 Vital 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 Vital Energy and Devon Energy, you can compare the effects of market volatilities on Vital 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 Vital Energy with a short position of Devon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vital Energy and Devon Energy.
Diversification Opportunities for Vital Energy and Devon Energy
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vital and Devon is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Vital Energy and Devon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Devon Energy and Vital 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 Vital Energy 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 Vital Energy i.e., Vital Energy and Devon Energy go up and down completely randomly.
Pair Corralation between Vital Energy and Devon Energy
Given the investment horizon of 90 days Vital Energy is expected to generate 2.59 times more return on investment than Devon Energy. However, Vital Energy is 2.59 times more volatile than Devon Energy. It trades about 0.07 of its potential returns per unit of risk. Devon Energy is currently generating about 0.14 per unit of risk. If you would invest 1,528 in Vital Energy on May 31, 2025 and sell it today you would earn a total of 254.00 from holding Vital Energy or generate 16.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vital Energy vs. Devon Energy
Performance |
| Timeline |
| Vital Energy |
| Devon Energy |
Vital Energy and Devon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vital Energy and Devon Energy
The main advantage of trading using opposite Vital Energy and Devon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vital 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 Vital Energy 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.| Devon Energy vs. Expand Energy | Devon Energy vs. Comstock Resources | Devon Energy vs. Kosmos Energy | Devon Energy vs. Northern Oil Gas |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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