Correlation Between Canadian Natural and Index Oil

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

Diversification Opportunities for Canadian Natural and Index Oil

0.0

Correlation Coefficient

Canadian Natural  Index Oil

Pay attention - limited upside

The 3 months correlation between Canadian and Index is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Index Oil and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Index Oil 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 Index Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Index Oil has no effect on the direction of Canadian Natural i.e., Canadian Natural and Index Oil go up and down completely randomly.

Pair Corralation between Canadian Natural and Index Oil

If you would invest  2,748  in Canadian Natural Resources on October 11, 2024 and sell it today you would earn a total of  515.00  from holding Canadian Natural Resources or generate 18.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Canadian Natural Resources  vs.  Index Oil and

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 unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Index Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Index Oil and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Index Oil is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Canadian Natural and Index Oil

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

The idea behind Canadian Natural Resources and Index Oil and 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.