Correlation Between International Business and Cenovus

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

By analyzing existing cross correlation between International Business Machines and Cenovus Energy 675, you can compare the effects of market volatilities on International Business 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 International Business with a short position of Cenovus. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Cenovus.

Diversification Opportunities for International Business and Cenovus

-0.86

Correlation Coefficient

International Business  Cenovus

Pay attention - limited upside

The 3 months correlation between International and Cenovus is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Cenovus Energy 675 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cenovus Energy 675 and International Business 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 International Business Machines 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 675 has no effect on the direction of International Business i.e., International Business and Cenovus go up and down completely randomly.

Pair Corralation between International Business and Cenovus

Considering the 90-day investment horizon International Business Machines is expected to generate 2.6 times more return on investment than Cenovus. However, International Business is 2.6 times more volatile than Cenovus Energy 675. It trades about 0.1 of its potential returns per unit of risk. Cenovus Energy 675 is currently generating about 0.16 per unit of risk. If you would invest  22,131  in International Business Machines on December 27, 2024 and sell it today you would earn a total of  2,859  from holding International Business Machines or generate 12.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	66.67%
Values	Daily Returns

International Business Machine  vs.  Cenovus Energy 675

International Business

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental drivers, International Business displayed solid returns over the last few months and may actually be approaching a breakup point.

Cenovus Energy 675

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cenovus Energy 675 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Cenovus may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with International Business and Cenovus

The main advantage of trading using opposite International Business and Cenovus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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 International Business Machines and Cenovus Energy 675 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.