Correlation Between Pioneer Natural and Canadian Natural

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

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

Diversification Opportunities for Pioneer Natural and Canadian Natural

0.03

Correlation Coefficient

Pioneer Natural  Canadian Natural

Significant diversification

The 3 months correlation between Pioneer and Canadian is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Pioneer Natural Resources 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 Pioneer 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 Pioneer Natural Resources 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 Pioneer Natural i.e., Pioneer Natural and Canadian Natural go up and down completely randomly.

Pair Corralation between Pioneer Natural and Canadian Natural

Assuming the 90 days horizon Pioneer Natural Resources is expected to generate 11.9 times more return on investment than Canadian Natural. However, Pioneer Natural is 11.9 times more volatile than Canadian Natural Resources. It trades about 0.07 of its potential returns per unit of risk. Canadian Natural Resources is currently generating about -0.02 per unit of risk. If you would invest  40.00  in Pioneer Natural Resources on September 26, 2024 and sell it today you would earn a total of  0.00  from holding Pioneer Natural Resources or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	84.38%
Values	Daily Returns

Pioneer Natural Resources  vs.  Canadian Natural Resources

Pioneer Natural Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Natural Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pioneer Natural reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Pioneer Natural and Canadian Natural

The main advantage of trading using opposite Pioneer Natural and Canadian Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pioneer Natural 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 Pioneer Natural Resources 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.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.