Correlation Between Canadian Natural and Enbridge
Can any of the company-specific risk be diversified away by investing in both Canadian Natural and Enbridge 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 Canadian Natural and Enbridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Natural Resources and Enbridge, you can compare the effects of market volatilities on Canadian Natural and Enbridge 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 Canadian Natural with a short position of Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Natural and Enbridge.
Diversification Opportunities for Canadian Natural and Enbridge
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Canadian and Enbridge is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Canadian Natural 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 Canadian Natural Resources are associated (or correlated) with Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of Canadian Natural i.e., Canadian Natural and Enbridge go up and down completely randomly.
Pair Corralation between Canadian Natural and Enbridge
Assuming the 90 days trading horizon Canadian Natural Resources is expected to generate 1.83 times more return on investment than Enbridge. However, Canadian Natural is 1.83 times more volatile than Enbridge. It trades about 0.05 of its potential returns per unit of risk. Enbridge is currently generating about 0.06 per unit of risk. If you would invest 3,378 in Canadian Natural Resources on August 28, 2024 and sell it today you would earn a total of 1,292 from holding Canadian Natural Resources or generate 38.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Natural Resources vs. Enbridge
Performance |
| Timeline |
| Canadian Natural Res |
| Enbridge |
Canadian Natural and Enbridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Natural and Enbridge
The main advantage of trading using opposite Canadian Natural and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Natural position performs unexpectedly, Enbridge 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 Enbridge will offset losses from the drop in Enbridge's long position.| Canadian Natural vs. Yangarra Resources | Canadian Natural vs. iShares Canadian HYBrid | Canadian Natural vs. Altagas Cum Red | Canadian Natural vs. European Residential Real |
| Enbridge vs. Suncor Energy | Enbridge vs. Toronto Dominion Bank | Enbridge vs. Bank of Nova | Enbridge vs. BCE Inc |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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