Correlation Between Cenovus Energy and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both Cenovus Energy and Equinor ASA 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 Equinor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cenovus Energy and Equinor ASA ADR, you can compare the effects of market volatilities on Cenovus Energy and Equinor ASA 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 Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cenovus Energy and Equinor ASA.
Diversification Opportunities for Cenovus Energy and Equinor ASA
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cenovus and Equinor is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Cenovus Energy and Equinor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA 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 Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA ADR has no effect on the direction of Cenovus Energy i.e., Cenovus Energy and Equinor ASA go up and down completely randomly.
Pair Corralation between Cenovus Energy and Equinor ASA
Considering the 90-day investment horizon Cenovus Energy is expected to generate 0.98 times more return on investment than Equinor ASA. However, Cenovus Energy is 1.02 times less risky than Equinor ASA. It trades about 0.33 of its potential returns per unit of risk. Equinor ASA ADR is currently generating about -0.01 per unit of risk. If you would invest 1,493 in Cenovus Energy on January 20, 2024 and sell it today you would earn a total of 573.00 from holding Cenovus Energy or generate 38.38% 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. Equinor ASA ADR
Performance |
| Timeline |
| Cenovus Energy |
| Equinor ASA ADR |
Cenovus Energy and Equinor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cenovus Energy and Equinor ASA
The main advantage of trading using opposite Cenovus Energy and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cenovus Energy position performs unexpectedly, Equinor ASA 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 Equinor ASA will offset losses from the drop in Equinor ASA's long position.The idea behind Cenovus Energy and Equinor ASA 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.Check out your portfolio center.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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