Correlation Between Alphabet and Cenovus

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

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

Diversification Opportunities for Alphabet and Cenovus

0.25

Correlation Coefficient

Alphabet  Cenovus

Modest diversification

The 3 months correlation between Alphabet and Cenovus is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A 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 Alphabet 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 Alphabet Inc Class A 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 Alphabet i.e., Alphabet and Cenovus go up and down completely randomly.

Pair Corralation between Alphabet and Cenovus

Assuming the 90 days horizon Alphabet Inc Class A is expected to under-perform the Cenovus. In addition to that, Alphabet is 1.59 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 0.02 per unit of volatility. If you would invest  9,562  in Cenovus Energy 525 on December 26, 2024 and sell it today you would earn a total of  36.00  from holding Cenovus Energy 525 or generate 0.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	50.0%
Values	Daily Returns

Alphabet Inc Class A  vs.  Cenovus Energy 525

Alphabet Class A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and Cenovus

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

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.