Correlation Between Canadian Natural and Woodside Petroleum

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

Diversification Opportunities for Canadian Natural and Woodside Petroleum

0.69

Correlation Coefficient

Canadian Natural  Woodside Petroleum

Poor diversification

The 3 months correlation between Canadian and Woodside is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Woodside Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodside Petroleum 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 Woodside Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodside Petroleum has no effect on the direction of Canadian Natural i.e., Canadian Natural and Woodside Petroleum go up and down completely randomly.

Pair Corralation between Canadian Natural and Woodside Petroleum

Considering the 90-day investment horizon Canadian Natural Resources is expected to generate 0.32 times more return on investment than Woodside Petroleum. However, Canadian Natural Resources is 3.09 times less risky than Woodside Petroleum. It trades about -0.24 of its potential returns per unit of risk. Woodside Petroleum is currently generating about -0.1 per unit of risk. If you would invest  3,280  in Canadian Natural Resources on September 27, 2024 and sell it today you would lose (257.00) from holding Canadian Natural Resources or give up 7.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Canadian Natural Resources  vs.  Woodside Petroleum

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.

Woodside Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woodside Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Canadian Natural and Woodside Petroleum

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

The idea behind Canadian Natural Resources and Woodside Petroleum 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.