Correlation Between Transportadora and Cenovus Energy

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

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

Diversification Opportunities for Transportadora and Cenovus Energy

-0.63

Correlation Coefficient

Transportadora  Cenovus Energy

Excellent diversification

The 3 months correlation between Transportadora and Cenovus is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and Cenovus Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cenovus Energy and Transportadora 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 Transportadora de Gas are associated (or correlated) with Cenovus Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cenovus Energy has no effect on the direction of Transportadora i.e., Transportadora and Cenovus Energy go up and down completely randomly.

Pair Corralation between Transportadora and Cenovus Energy

Considering the 90-day investment horizon Transportadora de Gas is expected to generate 1.55 times more return on investment than Cenovus Energy. However, Transportadora is 1.55 times more volatile than Cenovus Energy. It trades about 0.04 of its potential returns per unit of risk. Cenovus Energy is currently generating about -0.09 per unit of risk. If you would invest  1,811  in Transportadora de Gas on July 4, 2024 and sell it today you would earn a total of  75.00  from holding Transportadora de Gas or generate 4.14% return on investment over 90 days.

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

Transportadora de Gas  vs.  Cenovus Energy

Transportadora de Gas

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Transportadora may actually be approaching a critical reversion point that can send shares even higher in November 2024.

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.

Pair Trading with Transportadora and Cenovus Energy

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

The idea behind Transportadora de Gas and Cenovus 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.