Correlation Between Canadian Natural and Exxon
Can any of the company-specific risk be diversified away by investing in both Canadian Natural and Exxon 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 Exxon 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 EXXON MOBIL CDR, you can compare the effects of market volatilities on Canadian Natural and Exxon 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 Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Natural and Exxon.
Diversification Opportunities for Canadian Natural and Exxon
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Canadian and Exxon is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and EXXON MOBIL CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXXON MOBIL CDR 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EXXON MOBIL CDR has no effect on the direction of Canadian Natural i.e., Canadian Natural and Exxon go up and down completely randomly.
Pair Corralation between Canadian Natural and Exxon
Assuming the 90 days trading horizon Canadian Natural Resources is expected to under-perform the Exxon. In addition to that, Canadian Natural is 1.23 times more volatile than EXXON MOBIL CDR. It trades about -0.18 of its total potential returns per unit of risk. EXXON MOBIL CDR is currently generating about -0.21 per unit of volatility. If you would invest 2,234 in EXXON MOBIL CDR on September 19, 2024 and sell it today you would lose (218.00) from holding EXXON MOBIL CDR or give up 9.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Natural Resources vs. EXXON MOBIL CDR
Performance |
| Timeline |
| Canadian Natural Res |
| EXXON MOBIL CDR |
Canadian Natural and Exxon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Natural and Exxon
The main advantage of trading using opposite Canadian Natural and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Natural position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.| Canadian Natural vs. Suncor Energy | Canadian Natural vs. Cenovus Energy | Canadian Natural vs. TC Energy Corp | Canadian Natural vs. Enbridge |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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