Correlation Between SandRidge Energy and Canadian Natural

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

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

Diversification Opportunities for SandRidge Energy and Canadian Natural

0.57

Correlation Coefficient

SandRidge Energy  Canadian Natural

Very weak diversification

The 3 months correlation between SandRidge and Canadian is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding SandRidge Energy 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 SandRidge Energy 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 SandRidge Energy 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 SandRidge Energy i.e., SandRidge Energy and Canadian Natural go up and down completely randomly.

Pair Corralation between SandRidge Energy and Canadian Natural

Allowing for the 90-day total investment horizon SandRidge Energy is expected to generate 13.88 times less return on investment than Canadian Natural. In addition to that, SandRidge Energy is 1.17 times more volatile than Canadian Natural Resources. It trades about 0.0 of its total potential returns per unit of risk. Canadian Natural Resources is currently generating about 0.04 per unit of volatility. If you would invest  2,986  in Canadian Natural Resources on December 29, 2024 and sell it today you would earn a total of  109.00  from holding Canadian Natural Resources or generate 3.65% return on investment over 90 days.

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

SandRidge Energy  vs.  Canadian Natural Resources

SandRidge Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days SandRidge Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, SandRidge Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Canadian Natural Res

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Natural Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Canadian Natural is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SandRidge Energy and Canadian Natural

The main advantage of trading using opposite SandRidge Energy and Canadian Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SandRidge Energy 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 SandRidge Energy 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.