Correlation Between Canadian Natural and Agnico Eagle

Can any of the company-specific risk be diversified away by investing in both Canadian Natural and Agnico Eagle 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 Canadian Natural and Agnico Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canadian Natural Resources and Agnico Eagle Mines, you can compare the effects of market volatilities on Canadian Natural and Agnico Eagle 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 Canadian Natural with a short position of Agnico Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Natural and Agnico Eagle.

Diversification Opportunities for Canadian Natural and Agnico Eagle

0.28

Correlation Coefficient

Canadian Natural  Agnico Eagle

Modest diversification

The 3 months correlation between Canadian and Agnico is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Agnico Eagle Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agnico Eagle Mines and Canadian Natural 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 Canadian Natural Resources are associated (or correlated) with Agnico Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agnico Eagle Mines has no effect on the direction of Canadian Natural i.e., Canadian Natural and Agnico Eagle go up and down completely randomly.

Pair Corralation between Canadian Natural and Agnico Eagle

Assuming the 90 days trading horizon Canadian Natural is expected to generate 3.8 times less return on investment than Agnico Eagle. But when comparing it to its historical volatility, Canadian Natural Resources is 1.08 times less risky than Agnico Eagle. It trades about 0.03 of its potential returns per unit of risk. Agnico Eagle Mines is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10,664  in Agnico Eagle Mines on September 3, 2024 and sell it today you would earn a total of  1,142  from holding Agnico Eagle Mines or generate 10.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Canadian Natural Resources  vs.  Agnico Eagle Mines

Canadian Natural Res

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Natural Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Canadian Natural is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Agnico Eagle Mines

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Agnico Eagle may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Canadian Natural and Agnico Eagle

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

The idea behind Canadian Natural Resources and Agnico Eagle Mines 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.