Correlation Between Cenovus and BRP

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

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

Diversification Opportunities for Cenovus and BRP

-0.06

Correlation Coefficient

Cenovus  BRP

Good diversification

The 3 months correlation between Cenovus and BRP is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Cenovus Energy 525 and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc 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 525 are associated (or correlated) with BRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRP Inc has no effect on the direction of Cenovus i.e., Cenovus and BRP go up and down completely randomly.

Pair Corralation between Cenovus and BRP

Assuming the 90 days trading horizon Cenovus Energy 525 is expected to under-perform the BRP. But the bond apears to be less risky and, when comparing its historical volatility, Cenovus Energy 525 is 1.77 times less risky than BRP. The bond trades about -0.01 of its potential returns per unit of risk. The BRP Inc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  5,033  in BRP Inc on October 25, 2024 and sell it today you would earn a total of  302.00  from holding BRP Inc or generate 6.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.68%
Values	Daily Returns

Cenovus Energy 525  vs.  BRP Inc

Cenovus Energy 525

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cenovus Energy 525 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cenovus is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

BRP Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BRP Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, BRP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cenovus and BRP

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

The idea behind Cenovus Energy 525 and BRP Inc 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.