Correlation Between Vista Oil and Canadian Natural

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

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

Diversification Opportunities for Vista Oil and Canadian Natural

-0.54

Correlation Coefficient

Vista Oil  Canadian Natural

Excellent diversification

The 3 months correlation between Vista and Canadian is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Vista Oil Gas 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 Vista Oil 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 Vista Oil Gas 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 Vista Oil i.e., Vista Oil and Canadian Natural go up and down completely randomly.

Pair Corralation between Vista Oil and Canadian Natural

Given the investment horizon of 90 days Vista Oil Gas is expected to generate 2.0 times more return on investment than Canadian Natural. However, Vista Oil is 2.0 times more volatile than Canadian Natural Resources. It trades about 0.07 of its potential returns per unit of risk. Canadian Natural Resources is currently generating about -0.42 per unit of risk. If you would invest  5,177  in Vista Oil Gas on September 22, 2024 and sell it today you would earn a total of  179.00  from holding Vista Oil Gas or generate 3.46% return on investment over 90 days.

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

Vista Oil Gas  vs.  Canadian Natural Resources

Vista Oil Gas

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vista Oil Gas are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Vista Oil unveiled 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. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Vista Oil and Canadian Natural

The main advantage of trading using opposite Vista Oil and Canadian Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vista Oil 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 Vista Oil Gas 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.