Correlation Between Cenovus Energy and Eni SPA

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

By analyzing existing cross correlation between Cenovus Energy and Eni SpA ADR, you can compare the effects of market volatilities on Cenovus Energy and Eni SPA 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 Eni SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cenovus Energy and Eni SPA.

Diversification Opportunities for Cenovus Energy and Eni SPA

0.07

Correlation Coefficient

Cenovus Energy  Eni SPA

Significant diversification

The 3 months correlation between Cenovus and Eni is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Cenovus Energy and Eni SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eni SpA ADR 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 Eni SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eni SpA ADR has no effect on the direction of Cenovus Energy i.e., Cenovus Energy and Eni SPA go up and down completely randomly.

Pair Corralation between Cenovus Energy and Eni SPA

Considering the 90-day investment horizon Cenovus Energy is expected to under-perform the Eni SPA. In addition to that, Cenovus Energy is 1.63 times more volatile than Eni SpA ADR. It trades about -0.09 of its total potential returns per unit of risk. Eni SpA ADR is currently generating about 0.01 per unit of volatility. If you would invest  3,073  in Eni SpA ADR on July 4, 2024 and sell it today you would earn a total of  4.00  from holding Eni SpA ADR or generate 0.13% return on investment over 90 days.

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

Cenovus Energy  vs.  Eni SpA ADR

Cenovus Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cenovus Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Eni SpA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eni SpA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Eni SPA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cenovus Energy and Eni SPA

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

The idea behind Cenovus Energy and Eni SpA ADR 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.