Devon Energy’s correlations last week
As we saw in the previous part, Devon Energy (DVN) stock fell sharply by ~5% last week. Crude oil and natural gas moved down by ~5% each in the same week. However, the SPDR S&P 500 ETF (SPY) was up by 1.3%. So DVN’s stock price was clearly under pressure due to falling crude oil and natural gas prices. In this part, we’ll quantify the relationship between DVN’s stock price and crude oil prices by studying DVN stock’s correlation coefficient with crude oil in the last one week and the last one month. We’ll also look at the extent to which Devon Energy’s stock price followed natural gas prices and the S&P 500 Index during these same timeframes.
For the week ending October 6, Devon Energy’s (DVN) stock had shown a correlation of ~85% with crude oil (USO) (SCO), which means that movements in crude oil had a very strong influence on DVN’s stock. In comparison to crude oil, DVN stock’s correlations with natural gas (UNG) were lower at ~21%, which means that movements in natural gas had little influence on DVN’s stock last week.
DVN stock’s correlation with the SPDR S&P 500 ETF (SPY) is about -51%, meaning daily movements in the S&P 500 Index didn’t influence DVN’s stock price. DVN’s stock has shown correlations of ~89%, -10%, and ~66% with crude oil (USO), natural gas (UNG), and the SPDR S&P 500 ETF (SPY), respectively, over the last one month.
Devon Energy’s peers
DVN’s peer Occidental Petroleum (OXY) had shown a correlation of ~75% with crude oil prices last week and rose ~1% due to a decline in crude prices. OXY had shown a correlation of about -10% and ~87% with natural gas and the SPDR S&P 500 ETF (SPY) last week. Occidental Petroleum’s production mix contains ~75% crude oil, and thus OXY has a high correlation with crude oil prices.
To know more about the correlation of various upstream stocks with energy commodities, refer to Market Realist’s series on Why Rise in Oil Could Be Necessary for Energy Stock Momentum.