Correlation Between TotalEnergies and Cenovus Energy
Can any of the company-specific risk be diversified away by investing in both TotalEnergies 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 TotalEnergies and Cenovus Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TotalEnergies SE ADR and Cenovus Energy, you can compare the effects of market volatilities on TotalEnergies 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 TotalEnergies with a short position of Cenovus Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of TotalEnergies and Cenovus Energy.
Diversification Opportunities for TotalEnergies and Cenovus Energy
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TotalEnergies and Cenovus is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE ADR and Cenovus Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cenovus Energy and TotalEnergies 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 TotalEnergies SE ADR 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 TotalEnergies i.e., TotalEnergies and Cenovus Energy go up and down completely randomly.
Pair Corralation between TotalEnergies and Cenovus Energy
Considering the 90-day investment horizon TotalEnergies SE ADR is expected to under-perform the Cenovus Energy. But the stock apears to be less risky and, when comparing its historical volatility, TotalEnergies SE ADR is 1.37 times less risky than Cenovus Energy. The stock trades about -0.39 of its potential returns per unit of risk. The Cenovus Energy is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 1,667 in Cenovus Energy on August 31, 2024 and sell it today you would lose (96.00) from holding Cenovus Energy or give up 5.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TotalEnergies SE ADR vs. Cenovus Energy
Performance |
| Timeline |
| TotalEnergies SE ADR |
| Cenovus Energy |
TotalEnergies and Cenovus Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TotalEnergies and Cenovus Energy
The main advantage of trading using opposite TotalEnergies and Cenovus Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TotalEnergies 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.| TotalEnergies vs. RLJ Lodging Trust | TotalEnergies vs. Aquagold International | TotalEnergies vs. Stepstone Group | TotalEnergies vs. Morningstar Unconstrained Allocation |
| Cenovus Energy vs. RLJ Lodging Trust | Cenovus Energy vs. Aquagold International | Cenovus Energy vs. Stepstone Group | Cenovus Energy vs. Morningstar Unconstrained Allocation |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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