Correlation Between Stabilis Solutions and Cenovus Energy

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

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

Diversification Opportunities for Stabilis Solutions and Cenovus Energy

-0.56

Correlation Coefficient

Stabilis Solutions  Cenovus Energy

Excellent diversification

The 3 months correlation between Stabilis and Cenovus is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Stabilis Solutions and Cenovus Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cenovus Energy and Stabilis Solutions 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 Stabilis Solutions 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 Stabilis Solutions i.e., Stabilis Solutions and Cenovus Energy go up and down completely randomly.

Pair Corralation between Stabilis Solutions and Cenovus Energy

Given the investment horizon of 90 days Stabilis Solutions is expected to generate 0.94 times more return on investment than Cenovus Energy. However, Stabilis Solutions is 1.06 times less risky than Cenovus Energy. It trades about -0.04 of its potential returns per unit of risk. Cenovus Energy is currently generating about -0.14 per unit of risk. If you would invest  418.00  in Stabilis Solutions on February 7, 2024 and sell it today you would lose (5.00) from holding Stabilis Solutions or give up 1.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Stabilis Solutions  vs.  Cenovus Energy

Stabilis Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stabilis Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Cenovus Energy

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cenovus Energy are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Cenovus Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stabilis Solutions and Cenovus Energy

The main advantage of trading using opposite Stabilis Solutions and Cenovus Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stabilis Solutions 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 Stabilis Solutions 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.