Correlation Between Canadian Natural and CNOOC

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

Diversification Opportunities for Canadian Natural and CNOOC

0.43

Correlation Coefficient

Canadian Natural  CNOOC

Very weak diversification

The 3 months correlation between Canadian and CNOOC is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and CNOOC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNOOC 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 CNOOC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNOOC has no effect on the direction of Canadian Natural i.e., Canadian Natural and CNOOC go up and down completely randomly.

Pair Corralation between Canadian Natural and CNOOC

Assuming the 90 days horizon Canadian Natural Resources is expected to under-perform the CNOOC. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Natural Resources is 1.14 times less risky than CNOOC. The stock trades about -0.05 of its potential returns per unit of risk. The CNOOC is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  226.00  in CNOOC on September 24, 2024 and sell it today you would lose (8.00) from holding CNOOC or give up 3.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Canadian Natural Resources  vs.  CNOOC

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. Despite nearly stable basic indicators, Canadian Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CNOOC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNOOC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CNOOC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Canadian Natural and CNOOC

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

The idea behind Canadian Natural Resources and CNOOC 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.