Correlation Between Cenovus Energy and Advent Wireless

Can any of the company-specific risk be diversified away by investing in both Cenovus Energy and Advent Wireless 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 Advent Wireless into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cenovus Energy and Advent Wireless, you can compare the effects of market volatilities on Cenovus Energy and Advent Wireless 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 Advent Wireless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cenovus Energy and Advent Wireless.

Diversification Opportunities for Cenovus Energy and Advent Wireless

-0.32

Correlation Coefficient

Cenovus Energy  Advent Wireless

Very good diversification

The 3 months correlation between Cenovus and Advent is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cenovus Energy and Advent Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advent Wireless 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 Advent Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advent Wireless has no effect on the direction of Cenovus Energy i.e., Cenovus Energy and Advent Wireless go up and down completely randomly.

Pair Corralation between Cenovus Energy and Advent Wireless

Assuming the 90 days trading horizon Cenovus Energy is expected to under-perform the Advent Wireless. But the stock apears to be less risky and, when comparing its historical volatility, Cenovus Energy is 2.13 times less risky than Advent Wireless. The stock trades about -0.07 of its potential returns per unit of risk. The Advent Wireless is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  65.00  in Advent Wireless on August 31, 2024 and sell it today you would earn a total of  18.00  from holding Advent Wireless or generate 27.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Cenovus Energy  vs.  Advent Wireless

Cenovus Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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 unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Advent Wireless

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advent Wireless are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Advent Wireless showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cenovus Energy and Advent Wireless

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

The idea behind Cenovus Energy and Advent Wireless 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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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.