Correlation Between Canadian Natural and Headwater Exploration
Can any of the company-specific risk be diversified away by investing in both Canadian Natural and Headwater Exploration 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 Headwater Exploration 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 Headwater Exploration, you can compare the effects of market volatilities on Canadian Natural and Headwater Exploration 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 Headwater Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Natural and Headwater Exploration.
Diversification Opportunities for Canadian Natural and Headwater Exploration
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canadian and Headwater is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Headwater Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Headwater Exploration 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 Headwater Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Headwater Exploration has no effect on the direction of Canadian Natural i.e., Canadian Natural and Headwater Exploration go up and down completely randomly.
Pair Corralation between Canadian Natural and Headwater Exploration
Assuming the 90 days trading horizon Canadian Natural Resources is expected to under-perform the Headwater Exploration. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Natural Resources is 1.36 times less risky than Headwater Exploration. The stock trades about -0.23 of its potential returns per unit of risk. The Headwater Exploration is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 689.00 in Headwater Exploration on November 27, 2024 and sell it today you would lose (23.00) from holding Headwater Exploration or give up 3.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Natural Resources vs. Headwater Exploration
Performance |
| Timeline |
| Canadian Natural Res |
| Headwater Exploration |
Canadian Natural and Headwater Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Natural and Headwater Exploration
The main advantage of trading using opposite Canadian Natural and Headwater Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Natural position performs unexpectedly, Headwater Exploration 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 Headwater Exploration will offset losses from the drop in Headwater Exploration's long position.| Canadian Natural vs. Suncor Energy | Canadian Natural vs. Cenovus Energy | Canadian Natural vs. TC Energy Corp | Canadian Natural vs. Enbridge |
| Headwater Exploration vs. Tamarack Valley Energy | Headwater Exploration vs. Cardinal Energy | Headwater Exploration vs. NuVista Energy |
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 CEOs Directory module to screen CEOs from public companies around the world.
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