Correlation Between Ovintiv and Cenovus Energy

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Can any of the company-specific risk be diversified away by investing in both Ovintiv 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 Ovintiv and Cenovus Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ovintiv and Cenovus Energy, you can compare the effects of market volatilities on Ovintiv 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 Ovintiv with a short position of Cenovus Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ovintiv and Cenovus Energy.

Diversification Opportunities for Ovintiv and Cenovus Energy

OvintivCenovusDiversified AwayOvintivCenovusDiversified Away100%
0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between Ovintiv and Cenovus is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ovintiv and Cenovus Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cenovus Energy and Ovintiv 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 Ovintiv 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 Ovintiv i.e., Ovintiv and Cenovus Energy go up and down completely randomly.

Pair Corralation between Ovintiv and Cenovus Energy

Assuming the 90 days trading horizon Ovintiv is expected to generate 1.08 times more return on investment than Cenovus Energy. However, Ovintiv is 1.08 times more volatile than Cenovus Energy. It trades about 0.01 of its potential returns per unit of risk. Cenovus Energy is currently generating about -0.02 per unit of risk. If you would invest  6,376  in Ovintiv on November 30, 2024 and sell it today you would lose (140.00) from holding Ovintiv or give up 2.2% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ovintiv  vs.  Cenovus Energy

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50
JavaScript chart by amCharts 3.21.15OVV CVE
       Timeline  
Ovintiv 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Ovintiv are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Ovintiv is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb54565860626466
Cenovus Energy 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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 technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2020.52121.52222.523

Ovintiv and Cenovus Energy Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.21-2.4-1.6-0.790.00.791.572.363.14 0.060.080.100.120.14
JavaScript chart by amCharts 3.21.15OVV CVE
       Returns  

Pair Trading with Ovintiv and Cenovus Energy

The main advantage of trading using opposite Ovintiv and Cenovus Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ovintiv 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 Ovintiv 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.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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