Correlation Between Canadian Natural and Jupiter Energy

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

Diversification Opportunities for Canadian Natural and Jupiter Energy

-0.47

Correlation Coefficient

Canadian Natural  Jupiter Energy

Very good diversification

The 3 months correlation between Canadian and Jupiter is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Jupiter Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jupiter Energy 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 Jupiter Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jupiter Energy has no effect on the direction of Canadian Natural i.e., Canadian Natural and Jupiter Energy go up and down completely randomly.

Pair Corralation between Canadian Natural and Jupiter Energy

Assuming the 90 days horizon Canadian Natural is expected to generate 53.63 times less return on investment than Jupiter Energy. But when comparing it to its historical volatility, Canadian Natural Resources is 19.24 times less risky than Jupiter Energy. It trades about 0.08 of its potential returns per unit of risk. Jupiter Energy Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.70  in Jupiter Energy Limited on October 12, 2024 and sell it today you would earn a total of  0.45  from holding Jupiter Energy Limited or generate 64.29% return on investment over 90 days.

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

Canadian Natural Resources  vs.  Jupiter Energy Limited

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. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Jupiter Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jupiter Energy Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Jupiter Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Natural and Jupiter Energy

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

The idea behind Canadian Natural Resources and Jupiter Energy Limited 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 Anywhere module to track or share privately all of your investments from the convenience of any device.