Correlation Between Canadian Natural and Despegar Corp

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

Diversification Opportunities for Canadian Natural and Despegar Corp

0.89

Correlation Coefficient

Canadian Natural  Despegar Corp

Very poor diversification

The 3 months correlation between Canadian and Despegar is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Despegar Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Despegar Corp 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 Despegar Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Despegar Corp has no effect on the direction of Canadian Natural i.e., Canadian Natural and Despegar Corp go up and down completely randomly.

Pair Corralation between Canadian Natural and Despegar Corp

Considering the 90-day investment horizon Canadian Natural Resources is expected to generate 0.37 times more return on investment than Despegar Corp. However, Canadian Natural Resources is 2.71 times less risky than Despegar Corp. It trades about 0.06 of its potential returns per unit of risk. Despegar Corp is currently generating about -0.07 per unit of risk. If you would invest  7,580  in Canadian Natural Resources on January 24, 2024 and sell it today you would earn a total of  97.00  from holding Canadian Natural Resources or generate 1.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Canadian Natural Resources  vs.  Despegar Corp

Canadian Natural Res

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Natural Resources are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Canadian Natural reported solid returns over the last few months and may actually be approaching a breakup point.

Despegar Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Despegar Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Despegar Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Natural and Despegar Corp

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

The idea behind Canadian Natural Resources and Despegar Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.