Correlation Between Canadian Natural and INSURANCE AUST

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

Diversification Opportunities for Canadian Natural and INSURANCE AUST

-0.45

Correlation Coefficient

Canadian Natural  INSURANCE AUST

Very good diversification

The 3 months correlation between Canadian and INSURANCE is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP 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 INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of Canadian Natural i.e., Canadian Natural and INSURANCE AUST go up and down completely randomly.

Pair Corralation between Canadian Natural and INSURANCE AUST

Assuming the 90 days horizon Canadian Natural Resources is expected to generate 1.22 times more return on investment than INSURANCE AUST. However, Canadian Natural is 1.22 times more volatile than INSURANCE AUST GRP. It trades about 0.08 of its potential returns per unit of risk. INSURANCE AUST GRP is currently generating about 0.07 per unit of risk. If you would invest  3,036  in Canadian Natural Resources on October 11, 2024 and sell it today you would earn a total of  79.00  from holding Canadian Natural Resources or generate 2.6% 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.  INSURANCE AUST GRP

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.

INSURANCE AUST GRP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INSURANCE AUST GRP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, INSURANCE AUST exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Natural and INSURANCE AUST

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

The idea behind Canadian Natural Resources and INSURANCE AUST GRP 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.