Correlation Between Cenovus and Wabash National

Can any of the company-specific risk be diversified away by investing in both Cenovus and Wabash National 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 Wabash National 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 Wabash National, you can compare the effects of market volatilities on Cenovus and Wabash National 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 Wabash National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cenovus and Wabash National.

Diversification Opportunities for Cenovus and Wabash National

0.44

Correlation Coefficient

Cenovus  Wabash National

Very weak diversification

The 3 months correlation between Cenovus and Wabash is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cenovus Energy 525 and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National 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 Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of Cenovus i.e., Cenovus and Wabash National go up and down completely randomly.

Pair Corralation between Cenovus and Wabash National

Assuming the 90 days trading horizon Cenovus Energy 525 is expected to generate 0.48 times more return on investment than Wabash National. However, Cenovus Energy 525 is 2.08 times less risky than Wabash National. It trades about -0.02 of its potential returns per unit of risk. Wabash National is currently generating about -0.07 per unit of risk. If you would invest  9,652  in Cenovus Energy 525 on October 25, 2024 and sell it today you would lose (112.00) from holding Cenovus Energy 525 or give up 1.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	73.33%
Values	Daily Returns

Cenovus Energy 525  vs.  Wabash National

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.

Wabash National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wabash National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Cenovus and Wabash National

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

The idea behind Cenovus Energy 525 and Wabash National 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.