Correlation Between Equinor ASA and Cenovus Energy
Can any of the company-specific risk be diversified away by investing in both Equinor ASA 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 Equinor ASA and Cenovus Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equinor ASA ADR and Cenovus Energy, you can compare the effects of market volatilities on Equinor ASA 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 Equinor ASA with a short position of Cenovus Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Cenovus Energy.
Diversification Opportunities for Equinor ASA and Cenovus Energy
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Equinor and Cenovus is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and Cenovus Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cenovus Energy and Equinor ASA 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 Equinor ASA ADR 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 Equinor ASA i.e., Equinor ASA and Cenovus Energy go up and down completely randomly.
Pair Corralation between Equinor ASA and Cenovus Energy
Given the investment horizon of 90 days Equinor ASA is expected to generate 1.99 times less return on investment than Cenovus Energy. But when comparing it to its historical volatility, Equinor ASA ADR is 1.23 times less risky than Cenovus Energy. It trades about 0.22 of its potential returns per unit of risk. Cenovus Energy is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 1,762 in Cenovus Energy on January 25, 2024 and sell it today you would earn a total of 348.50 from holding Cenovus Energy or generate 19.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equinor ASA ADR vs. Cenovus Energy
Performance |
| Timeline |
| Equinor ASA ADR |
| Cenovus Energy |
Equinor ASA and Cenovus Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and Cenovus Energy
The main advantage of trading using opposite Equinor ASA and Cenovus Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA 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.| Equinor ASA vs. Shell PLC ADR | Equinor ASA vs. BP PLC ADR | Equinor ASA vs. Eni SpA ADR | Equinor ASA vs. Galp Energa |
| 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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