Correlation Between US Energy and Canadian Natural
Can any of the company-specific risk be diversified away by investing in both US Energy 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 US Energy and Canadian Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Energy Corp and Canadian Natural Resources, you can compare the effects of market volatilities on US Energy 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 US Energy with a short position of Canadian Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Energy and Canadian Natural.
Diversification Opportunities for US Energy and Canadian Natural
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between USEG and Canadian is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding US Energy Corp 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 US Energy 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 US Energy Corp 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 US Energy i.e., US Energy and Canadian Natural go up and down completely randomly.
Pair Corralation between US Energy and Canadian Natural
Given the investment horizon of 90 days US Energy Corp is expected to generate 3.26 times more return on investment than Canadian Natural. However, US Energy is 3.26 times more volatile than Canadian Natural Resources. It trades about 0.25 of its potential returns per unit of risk. Canadian Natural Resources is currently generating about -0.06 per unit of risk. If you would invest 142.00 in US Energy Corp on September 4, 2024 and sell it today you would earn a total of 35.00 from holding US Energy Corp or generate 24.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Energy Corp vs. Canadian Natural Resources
Performance |
| Timeline |
| US Energy Corp |
| Canadian Natural Res |
US Energy and Canadian Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Energy and Canadian Natural
The main advantage of trading using opposite US Energy and Canadian Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Energy 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.| US Energy vs. Evolution Petroleum | US Energy vs. Ring Energy | US Energy vs. Gran Tierra Energy | US Energy vs. PEDEVCO Corp |
| Canadian Natural vs. Baytex Energy Corp | Canadian Natural vs. Vermilion Energy | Canadian Natural vs. Obsidian Energy | Canadian Natural vs. Ovintiv |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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