Correlation Between Freehold Royalties and Canadian Natural
Can any of the company-specific risk be diversified away by investing in both Freehold Royalties and Canadian Natural 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 Freehold Royalties and Canadian Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freehold Royalties and Canadian Natural Resources, you can compare the effects of market volatilities on Freehold Royalties and Canadian Natural 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 Freehold Royalties with a short position of Canadian Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freehold Royalties and Canadian Natural.
Diversification Opportunities for Freehold Royalties and Canadian Natural
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Freehold and Canadian is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Freehold Royalties and Canadian Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Natural Res and Freehold Royalties 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 Freehold Royalties are associated (or correlated) with Canadian Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Natural Res has no effect on the direction of Freehold Royalties i.e., Freehold Royalties and Canadian Natural go up and down completely randomly.
Pair Corralation between Freehold Royalties and Canadian Natural
Assuming the 90 days trading horizon Freehold Royalties is expected to generate 0.76 times more return on investment than Canadian Natural. However, Freehold Royalties is 1.31 times less risky than Canadian Natural. It trades about 0.08 of its potential returns per unit of risk. Canadian Natural Resources is currently generating about -0.23 per unit of risk. If you would invest 1,258 in Freehold Royalties on November 27, 2024 and sell it today you would earn a total of 18.00 from holding Freehold Royalties or generate 1.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freehold Royalties vs. Canadian Natural Resources
Performance |
| Timeline |
| Freehold Royalties |
| Canadian Natural Res |
Freehold Royalties and Canadian Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freehold Royalties and Canadian Natural
The main advantage of trading using opposite Freehold Royalties and Canadian Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freehold Royalties position performs unexpectedly, Canadian Natural 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 Canadian Natural will offset losses from the drop in Canadian Natural's long position.| Freehold Royalties vs. ARC Resources | Freehold Royalties vs. Whitecap Resources | Freehold Royalties vs. Peyto ExplorationDevelopment Corp | Freehold Royalties vs. Tourmaline Oil Corp |
| 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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