Correlation Between Canadian Natural and Ovintiv

Can any of the company-specific risk be diversified away by investing in both Canadian Natural and Ovintiv 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 Ovintiv 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 Ovintiv, you can compare the effects of market volatilities on Canadian Natural and Ovintiv 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 Ovintiv. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Natural and Ovintiv.

Diversification Opportunities for Canadian Natural and Ovintiv

0.34

Correlation Coefficient

Canadian Natural  Ovintiv

Weak diversification

The 3 months correlation between Canadian and Ovintiv is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Ovintiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ovintiv 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 Ovintiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ovintiv has no effect on the direction of Canadian Natural i.e., Canadian Natural and Ovintiv go up and down completely randomly.

Pair Corralation between Canadian Natural and Ovintiv

Assuming the 90 days trading horizon Canadian Natural Resources is expected to generate 0.89 times more return on investment than Ovintiv. However, Canadian Natural Resources is 1.12 times less risky than Ovintiv. It trades about -0.12 of its potential returns per unit of risk. Ovintiv is currently generating about -0.25 per unit of risk. If you would invest  4,658  in Canadian Natural Resources on September 17, 2024 and sell it today you would lose (180.00) from holding Canadian Natural Resources or give up 3.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Canadian Natural Resources  vs.  Ovintiv

Canadian Natural Res

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Natural Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Canadian Natural is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Ovintiv

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ovintiv are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ovintiv may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Canadian Natural and Ovintiv

The main advantage of trading using opposite Canadian Natural and Ovintiv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Natural position performs unexpectedly, Ovintiv 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 Ovintiv will offset losses from the drop in Ovintiv's long position.

The idea behind Canadian Natural Resources and Ovintiv pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Stocks Directory module to find actively traded stocks across global markets.