Correlation Between Cenovus Energy and Archrock

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

Diversification Opportunities for Cenovus Energy and Archrock

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Cenovus and Archrock is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cenovus Energy and Archrock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archrock and Cenovus Energy 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 are associated (or correlated) with Archrock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archrock has no effect on the direction of Cenovus Energy i.e., Cenovus Energy and Archrock go up and down completely randomly.

Pair Corralation between Cenovus Energy and Archrock

Considering the 90-day investment horizon Cenovus Energy is expected to under-perform the Archrock. In addition to that, Cenovus Energy is 1.48 times more volatile than Archrock. It trades about -0.22 of its total potential returns per unit of risk. Archrock is currently generating about -0.22 per unit of volatility. If you would invest  751.00  in Archrock on July 1, 2022 and sell it today you would lose (87.00)  from holding Archrock or give up 11.58% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Cenovus Energy  vs.  Archrock

 Performance (%) 
       Timeline  
Cenovus Energy 
Cenovus Performance
0 of 100
Over the last 90 days Cenovus Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in October 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cenovus Price Channel

Archrock 
Archrock Performance
0 of 100
Over the last 90 days Archrock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in October 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Archrock Price Channel

Cenovus Energy and Archrock Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cenovus Energy and Archrock

The main advantage of trading using opposite Cenovus Energy and Archrock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cenovus Energy position performs unexpectedly, Archrock 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 Archrock will offset losses from the drop in Archrock's long position.
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The idea behind Cenovus Energy and Archrock 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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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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