Correlation Between Canadian Natural and East Side

Can any of the company-specific risk be diversified away by investing in both Canadian Natural and East Side 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 East Side 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 East Side Games, you can compare the effects of market volatilities on Canadian Natural and East Side 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 East Side. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Natural and East Side.

Diversification Opportunities for Canadian Natural and East Side

0.75

Correlation Coefficient

Canadian Natural  East Side

Poor diversification

The 3 months correlation between Canadian and East is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and East Side Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Side Games 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 East Side. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Side Games has no effect on the direction of Canadian Natural i.e., Canadian Natural and East Side go up and down completely randomly.

Pair Corralation between Canadian Natural and East Side

Assuming the 90 days trading horizon Canadian Natural is expected to generate 6.88 times less return on investment than East Side. But when comparing it to its historical volatility, Canadian Natural Resources is 3.42 times less risky than East Side. It trades about 0.02 of its potential returns per unit of risk. East Side Games is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  41.00  in East Side Games on October 6, 2024 and sell it today you would earn a total of  17.00  from holding East Side Games or generate 41.46% return on investment over 90 days.

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

Canadian Natural Resources  vs.  East Side Games

Canadian Natural Res

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

East Side Games

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Side Games has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Canadian Natural and East Side

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

The idea behind Canadian Natural Resources and East Side Games 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.