Correlation Between Cenovus Energy and Chevron Corp

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

Diversification Opportunities for Cenovus Energy and Chevron Corp

  Correlation Coefficient

Poor diversification

The 3 months correlation between Cenovus and Chevron is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cenovus Energy and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Cenovus Energy i.e., Cenovus Energy and Chevron Corp go up and down completely randomly.

Pair Corralation between Cenovus Energy and Chevron Corp

Considering the 90-day investment horizon Cenovus Energy is expected to under-perform the Chevron Corp. In addition to that, Cenovus Energy is 1.66 times more volatile than Chevron Corp. It trades about -0.22 of its total potential returns per unit of risk. Chevron Corp is currently generating about -0.18 per unit of volatility. If you would invest  15,806  in Chevron Corp on July 2, 2022 and sell it today you would lose (1,329)  from holding Chevron Corp or give up 8.41% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Cenovus Energy  vs.  Chevron Corp

 Performance (%) 
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 latest weak 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.

Cenovus Price Channel

Chevron Corp 
Chevron Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chevron Price Channel

Cenovus Energy and Chevron Corp Volatility Contrast

   Predicted Return Density   

Pair Trading with Cenovus Energy and Chevron Corp

The main advantage of trading using opposite Cenovus Energy and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cenovus Energy position performs unexpectedly, Chevron Corp 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.
Cenovus Energy vs. Chevron Corp
The idea behind Cenovus Energy and Chevron Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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