Correlation Between Cenovus Energy and Transportadora

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

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

Diversification Opportunities for Cenovus Energy and Transportadora

-0.69

Correlation Coefficient

Cenovus Energy  Transportadora

Excellent diversification

The 3 months correlation between Cenovus and Transportadora is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Cenovus Energy and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas 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 Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of Cenovus Energy i.e., Cenovus Energy and Transportadora go up and down completely randomly.

Pair Corralation between Cenovus Energy and Transportadora

Considering the 90-day investment horizon Cenovus Energy is expected to under-perform the Transportadora. But the stock apears to be less risky and, when comparing its historical volatility, Cenovus Energy is 1.57 times less risky than Transportadora. The stock trades about -0.12 of its potential returns per unit of risk. The Transportadora de Gas is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,887  in Transportadora de Gas on August 21, 2024 and sell it today you would earn a total of  1,031  from holding Transportadora de Gas or generate 54.64% 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.  Transportadora de Gas

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 fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Transportadora de Gas

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Transportadora unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cenovus Energy and Transportadora

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

The idea behind Cenovus Energy and Transportadora de Gas 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.