Correlation Between Cenovus Energy and Exxon

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

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

Diversification Opportunities for Cenovus Energy and Exxon

-0.13

Correlation Coefficient

Cenovus Energy  Exxon

Good diversification

The 3 months correlation between Cenovus and Exxon is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Cenovus Energy and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Cenovus Energy i.e., Cenovus Energy and Exxon go up and down completely randomly.

Pair Corralation between Cenovus Energy and Exxon

Considering the 90-day investment horizon Cenovus Energy is expected to under-perform the Exxon. In addition to that, Cenovus Energy is 1.56 times more volatile than Exxon Mobil Corp. It trades about -0.03 of its total potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.15 per unit of volatility. If you would invest  10,482  in Exxon Mobil Corp on December 28, 2024 and sell it today you would earn a total of  1,307  from holding Exxon Mobil Corp or generate 12.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Cenovus Energy  vs.  Exxon Mobil Corp

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 rather sound basic indicators, Cenovus Energy is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Exxon Mobil Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Exxon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cenovus Energy and Exxon

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

The idea behind Cenovus Energy and Exxon Mobil Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.