Correlation Between Vaalco Energy and Canadian Natural

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

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

Diversification Opportunities for Vaalco Energy and Canadian Natural

0.87

Correlation Coefficient

Vaalco Energy  Canadian Natural

Very poor diversification

The 3 months correlation between Vaalco and Canadian is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vaalco Energy 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 Vaalco Energy 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 Vaalco Energy 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 Vaalco Energy i.e., Vaalco Energy and Canadian Natural go up and down completely randomly.

Pair Corralation between Vaalco Energy and Canadian Natural

Considering the 90-day investment horizon Vaalco Energy is expected to under-perform the Canadian Natural. In addition to that, Vaalco Energy is 1.38 times more volatile than Canadian Natural Resources. It trades about -0.2 of its total potential returns per unit of risk. Canadian Natural Resources is currently generating about -0.12 per unit of volatility. If you would invest  3,419  in Canadian Natural Resources on September 24, 2024 and sell it today you would lose (461.00) from holding Canadian Natural Resources or give up 13.48% of portfolio value over 90 days.

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

Vaalco Energy  vs.  Canadian Natural Resources

Vaalco Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vaalco Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Vaalco Energy and Canadian Natural

The main advantage of trading using opposite Vaalco Energy and Canadian Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vaalco Energy 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 Vaalco Energy 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .