Correlation Between Mitsui and Canadian Natural

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

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

Diversification Opportunities for Mitsui and Canadian Natural

0.6

Correlation Coefficient

Mitsui  Canadian Natural

Poor diversification

The 3 months correlation between Mitsui and Canadian is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Company 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 Mitsui 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 Mitsui Company 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 Mitsui i.e., Mitsui and Canadian Natural go up and down completely randomly.

Pair Corralation between Mitsui and Canadian Natural

If you would invest  7,379  in Canadian Natural Resources on January 20, 2024 and sell it today you would earn a total of  276.00  from holding Canadian Natural Resources or generate 3.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.55%
Values	Daily Returns

Mitsui Company  vs.  Canadian Natural Resources

Mitsui Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Mitsui is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Canadian Natural Res

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Natural Resources are ranked lower than 17 (%) 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.

Pair Trading with Mitsui and Canadian Natural

The main advantage of trading using opposite Mitsui and Canadian Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsui 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 Mitsui Company 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.