Correlation Between Canadian Natural and Canadian Tire

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

Diversification Opportunities for Canadian Natural and Canadian Tire

0.14

Correlation Coefficient

Canadian Natural  Canadian Tire

Average diversification

The 3 months correlation between Canadian and Canadian is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Canadian Tire Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Tire Corp 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 Canadian Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Tire Corp has no effect on the direction of Canadian Natural i.e., Canadian Natural and Canadian Tire go up and down completely randomly.

Pair Corralation between Canadian Natural and Canadian Tire

Assuming the 90 days horizon Canadian Natural Resources is expected to under-perform the Canadian Tire. In addition to that, Canadian Natural is 1.46 times more volatile than Canadian Tire Corp. It trades about -0.03 of its total potential returns per unit of risk. Canadian Tire Corp is currently generating about 0.1 per unit of volatility. If you would invest  9,940  in Canadian Tire Corp on October 7, 2024 and sell it today you would earn a total of  420.00  from holding Canadian Tire Corp or generate 4.23% return on investment over 90 days.

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

Canadian Natural Resources  vs.  Canadian Tire Corp

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 nearly stable basic indicators, Canadian Natural is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Canadian Tire Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Tire Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Canadian Tire is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Canadian Natural and Canadian Tire

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

The idea behind Canadian Natural Resources and Canadian Tire Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.