Correlation Between Canadian Natural and S A P

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

Diversification Opportunities for Canadian Natural and S A P

-0.38

Correlation Coefficient

Canadian Natural  S A P

Very good diversification

The 3 months correlation between Canadian and SAP is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Saputo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saputo Inc 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saputo Inc has no effect on the direction of Canadian Natural i.e., Canadian Natural and S A P go up and down completely randomly.

Pair Corralation between Canadian Natural and S A P

Assuming the 90 days trading horizon Canadian Natural Resources is expected to generate 1.8 times more return on investment than S A P. However, Canadian Natural is 1.8 times more volatile than Saputo Inc. It trades about 0.03 of its potential returns per unit of risk. Saputo Inc is currently generating about -0.19 per unit of risk. If you would invest  4,657  in Canadian Natural Resources on September 3, 2024 and sell it today you would earn a total of  95.00  from holding Canadian Natural Resources or generate 2.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Canadian Natural Resources  vs.  Saputo Inc

Canadian Natural Res

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Natural Resources are ranked lower than 2 (%) 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.

Saputo Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saputo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Canadian Natural and S A P

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

The idea behind Canadian Natural Resources and Saputo Inc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.