Correlation Between E L and Cenovus Energy
Can any of the company-specific risk be diversified away by investing in both E L and Cenovus Energy 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 E L and Cenovus Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E L Financial Corp and Cenovus Energy, you can compare the effects of market volatilities on E L and Cenovus Energy 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 E L with a short position of Cenovus Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of E L and Cenovus Energy.
Diversification Opportunities for E L and Cenovus Energy
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ELF and Cenovus is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding E L Financial Corp and Cenovus Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cenovus Energy and E L 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 E L Financial Corp are associated (or correlated) with Cenovus Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cenovus Energy has no effect on the direction of E L i.e., E L and Cenovus Energy go up and down completely randomly.
Pair Corralation between E L and Cenovus Energy
Assuming the 90 days trading horizon E L Financial Corp is expected to generate 1.37 times more return on investment than Cenovus Energy. However, E L is 1.37 times more volatile than Cenovus Energy. It trades about 0.26 of its potential returns per unit of risk. Cenovus Energy is currently generating about -0.18 per unit of risk. If you would invest 131,500 in E L Financial Corp on August 29, 2024 and sell it today you would earn a total of 16,000 from holding E L Financial Corp or generate 12.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
E L Financial Corp vs. Cenovus Energy
Performance |
| Timeline |
| E L Financial |
| Cenovus Energy |
E L and Cenovus Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E L and Cenovus Energy
The main advantage of trading using opposite E L and Cenovus Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E L position performs unexpectedly, Cenovus Energy 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 Cenovus Energy will offset losses from the drop in Cenovus Energy's long position.| E L vs. Algoma Central | E L vs. Winpak | E L vs. Fairfax Financial Holdings | E L vs. Economic Investment Trust |
| Cenovus Energy vs. Enbridge Pref 5 | Cenovus Energy vs. Enbridge Pref 11 | Cenovus Energy vs. Enbridge Pref L | Cenovus Energy vs. E Split Corp |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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