Correlation Between Imperial Oil and Canadian Natural

Can any of the company-specific risk be diversified away by investing in both Imperial Oil and Canadian Natural 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 Imperial Oil and Canadian Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Imperial Oil and Canadian Natural Resources, you can compare the effects of market volatilities on Imperial Oil and Canadian Natural 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 Imperial Oil with a short position of Canadian Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Oil and Canadian Natural.

Diversification Opportunities for Imperial Oil and Canadian Natural

0.9

Correlation Coefficient

Imperial Oil  Canadian Natural

Almost no diversification

The 3 months correlation between Imperial and Canadian is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Oil and Canadian Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Natural Res and Imperial Oil 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 Imperial Oil are associated (or correlated) with Canadian Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Natural Res has no effect on the direction of Imperial Oil i.e., Imperial Oil and Canadian Natural go up and down completely randomly.

Pair Corralation between Imperial Oil and Canadian Natural

Assuming the 90 days trading horizon Imperial Oil is expected to generate 0.91 times more return on investment than Canadian Natural. However, Imperial Oil is 1.09 times less risky than Canadian Natural. It trades about 0.1 of its potential returns per unit of risk. Canadian Natural Resources is currently generating about -0.05 per unit of risk. If you would invest  9,725  in Imperial Oil on September 6, 2024 and sell it today you would earn a total of  304.00  from holding Imperial Oil or generate 3.13% return on investment over 90 days.

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

Imperial Oil  vs.  Canadian Natural Resources

Imperial Oil

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Oil are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Imperial Oil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Canadian Natural Res

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Natural Resources are ranked lower than 3 (%) 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.

Pair Trading with Imperial Oil and Canadian Natural

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

The idea behind Imperial Oil and Canadian Natural Resources 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.