Correlation Between Canadian Natural and SDX Energy
Can any of the company-specific risk be diversified away by investing in both Canadian Natural and SDX 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 SDX 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 SDX Energy plc, you can compare the effects of market volatilities on Canadian Natural and SDX 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 SDX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Natural and SDX Energy.
Diversification Opportunities for Canadian Natural and SDX Energy
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Canadian and SDX is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and SDX Energy plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SDX Energy plc 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 SDX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SDX Energy plc has no effect on the direction of Canadian Natural i.e., Canadian Natural and SDX Energy go up and down completely randomly.
Pair Corralation between Canadian Natural and SDX Energy
Considering the 90-day investment horizon Canadian Natural is expected to generate 171.68 times less return on investment than SDX Energy. But when comparing it to its historical volatility, Canadian Natural Resources is 21.66 times less risky than SDX Energy. It trades about 0.01 of its potential returns per unit of risk. SDX Energy plc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1.42 in SDX Energy plc on November 9, 2024 and sell it today you would lose (1.29) from holding SDX Energy plc or give up 90.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.89% |
| Values | Daily Returns |
Canadian Natural Resources vs. SDX Energy plc
Performance |
| Timeline |
| Canadian Natural Res |
| SDX Energy plc |
Canadian Natural and SDX Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Natural and SDX Energy
The main advantage of trading using opposite Canadian Natural and SDX Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Natural position performs unexpectedly, SDX 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 SDX Energy will offset losses from the drop in SDX Energy's long position.| Canadian Natural vs. Baytex Energy Corp | Canadian Natural vs. Vermilion Energy | Canadian Natural vs. Obsidian Energy | Canadian Natural vs. Ovintiv |
| SDX Energy vs. 1st NRG Corp | SDX Energy vs. Petro Viking Energy | SDX Energy vs. Otto Energy Limited | SDX Energy vs. Empire Petroleum 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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