Correlation Between Canadian Natural and Civitas Resources

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

Diversification Opportunities for Canadian Natural and Civitas Resources

0.54

Correlation Coefficient

Canadian Natural  Civitas Resources

Very weak diversification

The 3 months correlation between Canadian and Civitas is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Civitas Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Civitas Resources 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 Civitas Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Civitas Resources has no effect on the direction of Canadian Natural i.e., Canadian Natural and Civitas Resources go up and down completely randomly.

Pair Corralation between Canadian Natural and Civitas Resources

Considering the 90-day investment horizon Canadian Natural Resources is expected to under-perform the Civitas Resources. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Natural Resources is 1.43 times less risky than Civitas Resources. The stock trades about -0.09 of its potential returns per unit of risk. The Civitas Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,876  in Civitas Resources on October 27, 2024 and sell it today you would earn a total of  241.00  from holding Civitas Resources or generate 4.94% return on investment over 90 days.

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

Canadian Natural Resources  vs.  Civitas Resources

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. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Civitas Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Civitas Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Civitas Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Canadian Natural and Civitas Resources

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

The idea behind Canadian Natural Resources and Civitas Resources 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.