Correlation Between Cenovus Energy and TotalEnergies

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

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

Diversification Opportunities for Cenovus Energy and TotalEnergies

0.3

Correlation Coefficient

Cenovus Energy  TotalEnergies

Weak diversification

The 3 months correlation between Cenovus and TotalEnergies is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cenovus Energy and TotalEnergies SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE ADR 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 TotalEnergies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TotalEnergies SE ADR has no effect on the direction of Cenovus Energy i.e., Cenovus Energy and TotalEnergies go up and down completely randomly.

Pair Corralation between Cenovus Energy and TotalEnergies

Considering the 90-day investment horizon Cenovus Energy is expected to under-perform the TotalEnergies. In addition to that, Cenovus Energy is 2.1 times more volatile than TotalEnergies SE ADR. It trades about -0.04 of its total potential returns per unit of risk. TotalEnergies SE ADR is currently generating about 0.13 per unit of volatility. If you would invest  5,892  in TotalEnergies SE ADR on November 28, 2024 and sell it today you would earn a total of  175.00  from holding TotalEnergies SE ADR or generate 2.97% return on investment over 90 days.

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

Cenovus Energy  vs.  TotalEnergies SE ADR

Cenovus Energy

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

TotalEnergies SE ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TotalEnergies SE ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, TotalEnergies may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Cenovus Energy and TotalEnergies

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

The idea behind Cenovus Energy and TotalEnergies SE ADR 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.