Correlation Between Cenovus Energy and Suncor Energy

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

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

Diversification Opportunities for Cenovus Energy and Suncor Energy

0.31

Correlation Coefficient

Cenovus Energy  Suncor Energy

Weak diversification

The 3 months correlation between Cenovus and Suncor is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cenovus Energy and Suncor Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suncor Energy 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 Suncor Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suncor Energy has no effect on the direction of Cenovus Energy i.e., Cenovus Energy and Suncor Energy go up and down completely randomly.

Pair Corralation between Cenovus Energy and Suncor Energy

Considering the 90-day investment horizon Cenovus Energy is expected to under-perform the Suncor Energy. In addition to that, Cenovus Energy is 1.11 times more volatile than Suncor Energy. It trades about -0.13 of its total potential returns per unit of risk. Suncor Energy is currently generating about -0.01 per unit of volatility. If you would invest  4,013  in Suncor Energy on August 30, 2024 and sell it today you would lose (58.00) from holding Suncor Energy or give up 1.45% of portfolio value over 90 days.

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

Cenovus Energy  vs.  Suncor Energy

Cenovus Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cenovus Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Suncor Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suncor Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Suncor Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cenovus Energy and Suncor Energy

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

The idea behind Cenovus Energy and Suncor 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.