Correlation Between Cenovus Energy and Labrador Iron

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

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

Diversification Opportunities for Cenovus Energy and Labrador Iron

-0.75

Correlation Coefficient

Cenovus Energy  Labrador Iron

Pay attention - limited upside

The 3 months correlation between Cenovus and Labrador is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cenovus Energy and Labrador Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labrador Iron Ore and Cenovus 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 Cenovus Energy are associated (or correlated) with Labrador Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labrador Iron Ore has no effect on the direction of Cenovus Energy i.e., Cenovus Energy and Labrador Iron go up and down completely randomly.

Pair Corralation between Cenovus Energy and Labrador Iron

Assuming the 90 days trading horizon Cenovus Energy is expected to generate 2.1 times more return on investment than Labrador Iron. However, Cenovus Energy is 2.1 times more volatile than Labrador Iron Ore. It trades about 0.18 of its potential returns per unit of risk. Labrador Iron Ore is currently generating about -0.12 per unit of risk. If you would invest  1,595  in Cenovus Energy on May 4, 2025 and sell it today you would earn a total of  448.00  from holding Cenovus Energy or generate 28.09% return on investment over 90 days.

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

Cenovus Energy  vs.  Labrador Iron Ore

Cenovus Energy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cenovus Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Cenovus Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Labrador Iron Ore

Risk-Adjusted Performance

Very Weak

Over the last 90 days Labrador Iron Ore has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Cenovus Energy and Labrador Iron

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

The idea behind Cenovus Energy and Labrador Iron Ore 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.