Correlation Between Canadian Natural and Freehold Royalties
Can any of the company-specific risk be diversified away by investing in both Canadian Natural and Freehold Royalties 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 Freehold Royalties 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 Freehold Royalties, you can compare the effects of market volatilities on Canadian Natural and Freehold Royalties 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 Freehold Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Natural and Freehold Royalties.
Diversification Opportunities for Canadian Natural and Freehold Royalties
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Canadian and Freehold is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Freehold Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freehold Royalties 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 Freehold Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freehold Royalties has no effect on the direction of Canadian Natural i.e., Canadian Natural and Freehold Royalties go up and down completely randomly.
Pair Corralation between Canadian Natural and Freehold Royalties
Assuming the 90 days trading horizon Canadian Natural Resources is expected to generate 1.32 times more return on investment than Freehold Royalties. However, Canadian Natural is 1.32 times more volatile than Freehold Royalties. It trades about 0.03 of its potential returns per unit of risk. Freehold Royalties is currently generating about 0.01 per unit of risk. If you would invest 4,352 in Canadian Natural Resources on September 1, 2024 and sell it today you would earn a total of 400.00 from holding Canadian Natural Resources or generate 9.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Natural Resources vs. Freehold Royalties
Performance |
| Timeline |
| Canadian Natural Res |
| Freehold Royalties |
Canadian Natural and Freehold Royalties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Natural and Freehold Royalties
The main advantage of trading using opposite Canadian Natural and Freehold Royalties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Natural position performs unexpectedly, Freehold Royalties 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 Freehold Royalties will offset losses from the drop in Freehold Royalties' long position.| Canadian Natural vs. Suncor Energy | Canadian Natural vs. Cenovus Energy | Canadian Natural vs. TC Energy Corp | Canadian Natural vs. Enbridge |
| Freehold Royalties vs. ARC Resources | Freehold Royalties vs. Whitecap Resources | Freehold Royalties vs. Peyto ExplorationDevelopment Corp | Freehold Royalties vs. Tourmaline Oil Corp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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