Correlation Between Canadian Natural and Reconnaissance Energy

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

Diversification Opportunities for Canadian Natural and Reconnaissance Energy

-0.41

Correlation Coefficient

Canadian Natural  Reconnaissance Energy

Very good diversification

The 3 months correlation between Canadian and Reconnaissance is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Reconnaissance Energy Africa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reconnaissance Energy 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 Reconnaissance Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reconnaissance Energy has no effect on the direction of Canadian Natural i.e., Canadian Natural and Reconnaissance Energy go up and down completely randomly.

Pair Corralation between Canadian Natural and Reconnaissance Energy

Considering the 90-day investment horizon Canadian Natural Resources is expected to generate 0.39 times more return on investment than Reconnaissance Energy. However, Canadian Natural Resources is 2.55 times less risky than Reconnaissance Energy. It trades about 0.02 of its potential returns per unit of risk. Reconnaissance Energy Africa is currently generating about 0.01 per unit of risk. If you would invest  2,752  in Canadian Natural Resources on September 19, 2024 and sell it today you would earn a total of  309.00  from holding Canadian Natural Resources or generate 11.23% return on investment over 90 days.

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

Canadian Natural Resources  vs.  Reconnaissance Energy Africa

Canadian Natural Res

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Reconnaissance Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Reconnaissance Energy Africa are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Reconnaissance Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Canadian Natural and Reconnaissance Energy

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

The idea behind Canadian Natural Resources and Reconnaissance Energy Africa 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.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.