Correlation Between Canadian Natural and Hemisphere Energy
Can any of the company-specific risk be diversified away by investing in both Canadian Natural and Hemisphere Energy 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 Hemisphere Energy 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 Hemisphere Energy, you can compare the effects of market volatilities on Canadian Natural and Hemisphere Energy 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 Hemisphere Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Natural and Hemisphere Energy.
Diversification Opportunities for Canadian Natural and Hemisphere Energy
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canadian and Hemisphere is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Hemisphere Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hemisphere Energy 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 Hemisphere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hemisphere Energy has no effect on the direction of Canadian Natural i.e., Canadian Natural and Hemisphere Energy go up and down completely randomly.
Pair Corralation between Canadian Natural and Hemisphere Energy
Assuming the 90 days trading horizon Canadian Natural is expected to generate 1.77 times less return on investment than Hemisphere Energy. But when comparing it to its historical volatility, Canadian Natural Resources is 1.08 times less risky than Hemisphere Energy. It trades about 0.04 of its potential returns per unit of risk. Hemisphere Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 114.00 in Hemisphere Energy on September 1, 2024 and sell it today you would earn a total of 74.00 from holding Hemisphere Energy or generate 64.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Natural Resources vs. Hemisphere Energy
Performance |
| Timeline |
| Canadian Natural Res |
| Hemisphere Energy |
Canadian Natural and Hemisphere Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Natural and Hemisphere Energy
The main advantage of trading using opposite Canadian Natural and Hemisphere Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Natural position performs unexpectedly, Hemisphere Energy 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 Hemisphere Energy will offset losses from the drop in Hemisphere Energy's long position.| Canadian Natural vs. Suncor Energy | Canadian Natural vs. Cenovus Energy | Canadian Natural vs. TC Energy Corp | Canadian Natural vs. Enbridge |
| Hemisphere Energy vs. InPlay Oil Corp | Hemisphere Energy vs. Pine Cliff Energy | Hemisphere Energy vs. Journey Energy | Hemisphere Energy vs. Yangarra Resources |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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