Correlation Between Chevron Corp and Cenovus Energy
Can any of the company-specific risk be diversified away by investing in both Chevron Corp 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 Chevron Corp and Cenovus Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Cenovus Energy, you can compare the effects of market volatilities on Chevron Corp 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 Chevron Corp with a short position of Cenovus Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Cenovus Energy.
Diversification Opportunities for Chevron Corp and Cenovus Energy
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chevron and Cenovus is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Cenovus Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cenovus Energy and Chevron Corp 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 Chevron Corp 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 Chevron Corp i.e., Chevron Corp and Cenovus Energy go up and down completely randomly.
Pair Corralation between Chevron Corp and Cenovus Energy
Considering the 90-day investment horizon Chevron Corp is expected to under-perform the Cenovus Energy. But the stock apears to be less risky and, when comparing its historical volatility, Chevron Corp is 1.63 times less risky than Cenovus Energy. The stock trades about -0.01 of its potential returns per unit of risk. The Cenovus Energy is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,907 in Cenovus Energy on January 19, 2024 and sell it today you would earn a total of 163.00 from holding Cenovus Energy or generate 8.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Chevron Corp vs. Cenovus Energy
Performance |
| Timeline |
| Chevron Corp |
| Cenovus Energy |
Chevron Corp and Cenovus Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and Cenovus Energy
The main advantage of trading using opposite Chevron Corp and Cenovus Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp 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.| Chevron Corp vs. BP PLC ADR | Chevron Corp vs. Shell PLC ADR | Chevron Corp vs. Petroleo Brasileiro Petrobras | Chevron Corp vs. Suncor Energy |
| Cenovus Energy vs. Imperial Oil | Cenovus Energy vs. Exxon Mobil Corp | Cenovus Energy vs. Chevron Corp | Cenovus Energy vs. BP PLC ADR |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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