Correlation Between Now and Cenovus Energy

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

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

Diversification Opportunities for Now and Cenovus Energy

-0.2

Correlation Coefficient

Now  Cenovus Energy

Good diversification

The 3 months correlation between Now and Cenovus is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and Cenovus Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cenovus Energy and Now 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 Now Inc 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 Now i.e., Now and Cenovus Energy go up and down completely randomly.

Pair Corralation between Now and Cenovus Energy

Given the investment horizon of 90 days Now Inc is expected to generate 1.59 times more return on investment than Cenovus Energy. However, Now is 1.59 times more volatile than Cenovus Energy. It trades about 0.15 of its potential returns per unit of risk. Cenovus Energy is currently generating about 0.0 per unit of risk. If you would invest  1,291  in Now Inc on December 27, 2024 and sell it today you would earn a total of  424.00  from holding Now Inc or generate 32.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Now Inc  vs.  Cenovus Energy

Now Inc

Risk-Adjusted Performance

Good

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

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.

Pair Trading with Now and Cenovus Energy

The main advantage of trading using opposite Now and Cenovus Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Now 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 Now Inc 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.