Correlation Between Cenovus Energy and DZS

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

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

Diversification Opportunities for Cenovus Energy and DZS

-0.32

Correlation Coefficient

Cenovus Energy  DZS

Very good diversification

The 3 months correlation between Cenovus and DZS is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cenovus Energy and DZS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DZS Inc 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 DZS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DZS Inc has no effect on the direction of Cenovus Energy i.e., Cenovus Energy and DZS go up and down completely randomly.

Pair Corralation between Cenovus Energy and DZS

Considering the 90-day investment horizon Cenovus Energy is expected to under-perform the DZS. But the stock apears to be less risky and, when comparing its historical volatility, Cenovus Energy is 3.12 times less risky than DZS. The stock trades about -0.12 of its potential returns per unit of risk. The DZS Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  163.00  in DZS Inc on March 13, 2024 and sell it today you would earn a total of  9.00  from holding DZS Inc or generate 5.52% return on investment over 90 days.

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

Cenovus Energy  vs.  DZS Inc

Cenovus Energy

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cenovus Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Cenovus Energy may actually be approaching a critical reversion point that can send shares even higher in July 2024.

DZS Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DZS Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, DZS demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cenovus Energy and DZS

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

The idea behind Cenovus Energy and DZS Inc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.