Correlation Between American Express and Cenovus

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

By analyzing existing cross correlation between American Express and Cenovus Energy 525, you can compare the effects of market volatilities on American Express and Cenovus 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 American Express with a short position of Cenovus. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Cenovus.

Diversification Opportunities for American Express and Cenovus

-0.07

Correlation Coefficient

American Express  Cenovus

Good diversification

The 3 months correlation between American and Cenovus is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Cenovus Energy 525 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cenovus Energy 525 and American Express 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 American Express are associated (or correlated) with Cenovus. 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 525 has no effect on the direction of American Express i.e., American Express and Cenovus go up and down completely randomly.

Pair Corralation between American Express and Cenovus

Considering the 90-day investment horizon American Express is expected to under-perform the Cenovus. In addition to that, American Express is 1.33 times more volatile than Cenovus Energy 525. It trades about -0.11 of its total potential returns per unit of risk. Cenovus Energy 525 is currently generating about 0.01 per unit of volatility. If you would invest  9,562  in Cenovus Energy 525 on December 25, 2024 and sell it today you would earn a total of  27.00  from holding Cenovus Energy 525 or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	49.15%
Values	Daily Returns

American Express  vs.  Cenovus Energy 525

American Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Express has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Cenovus Energy 525

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cenovus Energy 525 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cenovus is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Express and Cenovus

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

The idea behind American Express and Cenovus Energy 525 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.