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

0.91

Correlation Coefficient

Chevron Corp  Cenovus Energy

Almost no diversification

The 3 months correlation between Chevron and Cenovus is 0.91. 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 generate 0.71 times more return on investment than Cenovus Energy. However, Chevron Corp is 1.41 times less risky than Cenovus Energy. It trades about -0.01 of its potential returns per unit of risk. Cenovus Energy is currently generating about -0.07 per unit of risk. If you would invest  16,044  in Chevron Corp on February 3, 2024 and sell it today you would lose (44.00) from holding Chevron Corp or give up 0.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Chevron Corp  vs.  Cenovus Energy

Chevron Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Cenovus Energy

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cenovus Energy are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Cenovus Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

The idea behind Chevron Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..