Correlation Between Whitecap Resources and Canadian Natural

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

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

Diversification Opportunities for Whitecap Resources and Canadian Natural

0.83

Correlation Coefficient

Whitecap Resources  Canadian Natural

Very poor diversification

The 3 months correlation between Whitecap and Canadian is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Whitecap 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 Whitecap Resources 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 Whitecap 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 Whitecap Resources i.e., Whitecap Resources and Canadian Natural go up and down completely randomly.

Pair Corralation between Whitecap Resources and Canadian Natural

Assuming the 90 days trading horizon Whitecap Resources is expected to under-perform the Canadian Natural. But the stock apears to be less risky and, when comparing its historical volatility, Whitecap Resources is 1.1 times less risky than Canadian Natural. The stock trades about -0.01 of its potential returns per unit of risk. The Canadian Natural Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,338  in Canadian Natural Resources on September 16, 2024 and sell it today you would earn a total of  140.00  from holding Canadian Natural Resources or generate 3.23% return on investment over 90 days.

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

Whitecap Resources  vs.  Canadian Natural Resources

Whitecap Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whitecap Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Whitecap Resources is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Canadian Natural Res

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Natural Resources are ranked lower than 2 (%) 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 Whitecap Resources and Canadian Natural

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

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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.