Correlation Between Canadian Natural and Open Text

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

Diversification Opportunities for Canadian Natural and Open Text

-0.75

Correlation Coefficient

Canadian Natural  Open Text

Pay attention - limited upside

The 3 months correlation between Canadian and Open is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Natural Resources and Open Text Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Open Text 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 Open Text. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Open Text Corp has no effect on the direction of Canadian Natural i.e., Canadian Natural and Open Text go up and down completely randomly.

Pair Corralation between Canadian Natural and Open Text

Assuming the 90 days trading horizon Canadian Natural Resources is expected to generate 0.34 times more return on investment than Open Text. However, Canadian Natural Resources is 2.95 times less risky than Open Text. It trades about -0.19 of its potential returns per unit of risk. Open Text Corp is currently generating about -0.28 per unit of risk. If you would invest  10,743  in Canadian Natural Resources on February 3, 2024 and sell it today you would lose (504.00) from holding Canadian Natural Resources or give up 4.69% of portfolio value over 90 days.

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

Canadian Natural Resources  vs.  Open Text Corp

Canadian Natural Res

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Natural Resources are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Canadian Natural displayed solid returns over the last few months and may actually be approaching a breakup point.

Open Text Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Open Text Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Canadian Natural and Open Text

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

The idea behind Canadian Natural Resources and Open Text 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.