Correlation Between Suncor Energy and National Fuel

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

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

Diversification Opportunities for Suncor Energy and National Fuel

0.42

Correlation Coefficient

Suncor Energy  National Fuel

Very weak diversification

The 3 months correlation between Suncor and National is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Suncor Energy and National Fuel Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Fuel Gas and Suncor 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 Suncor Energy are associated (or correlated) with National Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Fuel Gas has no effect on the direction of Suncor Energy i.e., Suncor Energy and National Fuel go up and down completely randomly.

Pair Corralation between Suncor Energy and National Fuel

Allowing for the 90-day total investment horizon Suncor Energy is expected to generate 6.35 times less return on investment than National Fuel. In addition to that, Suncor Energy is 1.15 times more volatile than National Fuel Gas. It trades about 0.01 of its total potential returns per unit of risk. National Fuel Gas is currently generating about 0.09 per unit of volatility. If you would invest  5,954  in National Fuel Gas on September 3, 2024 and sell it today you would earn a total of  443.00  from holding National Fuel Gas or generate 7.44% return on investment over 90 days.

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

Suncor Energy  vs.  National Fuel Gas

Suncor Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suncor Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Suncor Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

National Fuel Gas

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Fuel Gas are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, National Fuel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Suncor Energy and National Fuel

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

The idea behind Suncor Energy and National Fuel Gas 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.