Correlation Between Alphabet and Canadian Natural

Can any of the company-specific risk be diversified away by investing in both Alphabet and Canadian Natural 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 Alphabet and Canadian Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alphabet Inc Class C and Canadian Natural Resources, you can compare the effects of market volatilities on Alphabet and Canadian Natural 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 Alphabet with a short position of Canadian Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Canadian Natural.

Diversification Opportunities for Alphabet and Canadian Natural

-0.74

Correlation Coefficient

Alphabet  Canadian Natural

Pay attention - limited upside

The 3 months correlation between Alphabet and Canadian is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Canadian Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Natural Res and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Canadian Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Natural Res has no effect on the direction of Alphabet i.e., Alphabet and Canadian Natural go up and down completely randomly.

Pair Corralation between Alphabet and Canadian Natural

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.0 times more return on investment than Canadian Natural. However, Alphabet Inc Class C is 1.0 times less risky than Canadian Natural. It trades about 0.09 of its potential returns per unit of risk. Canadian Natural Resources is currently generating about 0.04 per unit of risk. If you would invest  9,183  in Alphabet Inc Class C on October 5, 2024 and sell it today you would earn a total of  9,880  from holding Alphabet Inc Class C or generate 107.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.6%
Values	Daily Returns

Alphabet Inc Class C  vs.  Canadian Natural Resources

Alphabet Class C

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alphabet and Canadian Natural

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

The idea behind Alphabet Inc Class C and Canadian Natural 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.