Correlation Between Vermilion Energy and Canadian Natural

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

Diversification Opportunities for Vermilion Energy and Canadian Natural

0.87

Correlation Coefficient

Vermilion Energy  Canadian Natural

Very poor diversification

The 3 months correlation between Vermilion and Canadian is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vermilion 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 Vermilion 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 Vermilion 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 Vermilion Energy i.e., Vermilion Energy and Canadian Natural go up and down completely randomly.

Pair Corralation between Vermilion Energy and Canadian Natural

Considering the 90-day investment horizon Vermilion Energy is expected to under-perform the Canadian Natural. In addition to that, Vermilion Energy is 1.33 times more volatile than Canadian Natural Resources. It trades about -0.14 of its total potential returns per unit of risk. Canadian Natural Resources is currently generating about -0.16 per unit of volatility. If you would invest  3,340  in Canadian Natural Resources on November 29, 2024 and sell it today you would lose (476.00) from holding Canadian Natural Resources or give up 14.25% of portfolio value over 90 days.

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

Vermilion Energy  vs.  Canadian Natural Resources

Vermilion Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vermilion Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Canadian Natural Res

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canadian Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Vermilion Energy and Canadian Natural

The main advantage of trading using opposite Vermilion Energy and Canadian Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vermilion 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 Vermilion 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.