Correlation Between Cenovus and NETGEAR

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

By analyzing existing cross correlation between Cenovus Energy 425 and NETGEAR, you can compare the effects of market volatilities on Cenovus and NETGEAR 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 with a short position of NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cenovus and NETGEAR.

Diversification Opportunities for Cenovus and NETGEAR

-0.51

Correlation Coefficient

Cenovus  NETGEAR

Excellent diversification

The 3 months correlation between Cenovus and NETGEAR is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Cenovus Energy 425 and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR and Cenovus 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 425 are associated (or correlated) with NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Cenovus i.e., Cenovus and NETGEAR go up and down completely randomly.

Pair Corralation between Cenovus and NETGEAR

Assuming the 90 days trading horizon Cenovus Energy 425 is expected to under-perform the NETGEAR. But the bond apears to be less risky and, when comparing its historical volatility, Cenovus Energy 425 is 3.51 times less risky than NETGEAR. The bond trades about -0.19 of its potential returns per unit of risk. The NETGEAR is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  2,022  in NETGEAR on October 25, 2024 and sell it today you would earn a total of  799.00  from holding NETGEAR or generate 39.52% return on investment over 90 days.

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

Cenovus Energy 425  vs.  NETGEAR

Cenovus Energy 425

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cenovus Energy 425 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Cenovus Energy 425 investors.

NETGEAR

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cenovus and NETGEAR

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

The idea behind Cenovus Energy 425 and NETGEAR 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 Global Correlations module to find global opportunities by holding instruments from different markets.