Correlation Between Canadian Natural and Ishares Sp
Can any of the company-specific risk be diversified away by investing in both Canadian Natural and Ishares Sp 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 Ishares Sp 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 Ishares Sp 500, you can compare the effects of market volatilities on Canadian Natural and Ishares Sp 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 Ishares Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Natural and Ishares Sp.
Diversification Opportunities for Canadian Natural and Ishares Sp
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canadian and Ishares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Ishares Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ishares Sp 500 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 Ishares Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ishares Sp 500 has no effect on the direction of Canadian Natural i.e., Canadian Natural and Ishares Sp go up and down completely randomly.
Pair Corralation between Canadian Natural and Ishares Sp
Assuming the 90 days trading horizon Canadian Natural Resources is expected to generate 1.75 times more return on investment than Ishares Sp. However, Canadian Natural is 1.75 times more volatile than Ishares Sp 500. It trades about 0.05 of its potential returns per unit of risk. Ishares Sp 500 is currently generating about 0.04 per unit of risk. If you would invest 7,059 in Canadian Natural Resources on January 20, 2024 and sell it today you would earn a total of 3,472 from holding Canadian Natural Resources or generate 49.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Natural Resources vs. Ishares Sp 500
Performance |
| Timeline |
| Canadian Natural Res |
| Ishares Sp 500 |
Canadian Natural and Ishares Sp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Natural and Ishares Sp
The main advantage of trading using opposite Canadian Natural and Ishares Sp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Natural position performs unexpectedly, Ishares Sp 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 Ishares Sp will offset losses from the drop in Ishares Sp's long position.| Canadian Natural vs. Suncor Energy | Canadian Natural vs. Cenovus Energy | Canadian Natural vs. TC Energy Corp | Canadian Natural vs. Enbridge |
| Ishares Sp vs. Blackrock California Municipal | Ishares Sp vs. Blackrock Balanced Capital | Ishares Sp vs. Blackrock Eurofund Class | Ishares Sp vs. Blackrock Emerging Markets |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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