Correlation Between Canadian Natural and Exro Technologies

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

Diversification Opportunities for Canadian Natural and Exro Technologies

0.63

Correlation Coefficient

Canadian Natural  Exro Technologies

Poor diversification

The 3 months correlation between Canadian and Exro is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Exro Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exro Technologies 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 Exro Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exro Technologies has no effect on the direction of Canadian Natural i.e., Canadian Natural and Exro Technologies go up and down completely randomly.

Pair Corralation between Canadian Natural and Exro Technologies

Assuming the 90 days trading horizon Canadian Natural Resources is expected to generate 0.24 times more return on investment than Exro Technologies. However, Canadian Natural Resources is 4.25 times less risky than Exro Technologies. It trades about -0.13 of its potential returns per unit of risk. Exro Technologies is currently generating about -0.1 per unit of risk. If you would invest  4,664  in Canadian Natural Resources on December 2, 2024 and sell it today you would lose (579.00) from holding Canadian Natural Resources or give up 12.41% of portfolio value over 90 days.

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

Canadian Natural Resources  vs.  Exro Technologies

Canadian Natural Res

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Exro Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exro Technologies 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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Canadian Natural and Exro Technologies

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

The idea behind Canadian Natural Resources and Exro Technologies 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..