Correlation Between Suncor Energy and National Fuel

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

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

Diversification Opportunities for Suncor Energy and National Fuel

0.96

Correlation Coefficient

Suncor Energy  National Fuel

Almost no diversification

The 3 months correlation between Suncor and National is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Suncor Energy and National Fuel Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Fuel Gas and Suncor 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 Suncor Energy are associated (or correlated) with National Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Fuel Gas has no effect on the direction of Suncor Energy i.e., Suncor Energy and National Fuel go up and down completely randomly.

Pair Corralation between Suncor Energy and National Fuel

Allowing for the 90-day total investment horizon Suncor Energy is expected to generate 0.91 times more return on investment than National Fuel. However, Suncor Energy is 1.1 times less risky than National Fuel. It trades about 0.27 of its potential returns per unit of risk. National Fuel Gas is currently generating about 0.05 per unit of risk. If you would invest  3,731  in Suncor Energy on January 31, 2024 and sell it today you would earn a total of  238.00  from holding Suncor Energy or generate 6.38% return on investment over 90 days.

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

Suncor Energy  vs.  National Fuel Gas

Suncor Energy

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Suncor Energy are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Suncor Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

National Fuel Gas

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Fuel Gas are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, National Fuel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Suncor Energy and National Fuel

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

The idea behind Suncor Energy and National Fuel Gas 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.