Correlation Between Canadian National and Alstom SA
Can any of the company-specific risk be diversified away by investing in both Canadian National and Alstom SA 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 National and Alstom SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian National Railway and Alstom SA, you can compare the effects of market volatilities on Canadian National and Alstom SA 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 National with a short position of Alstom SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian National and Alstom SA.
Diversification Opportunities for Canadian National and Alstom SA
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Canadian and Alstom is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Canadian National Railway and Alstom SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alstom SA and Canadian National 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 National Railway are associated (or correlated) with Alstom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alstom SA has no effect on the direction of Canadian National i.e., Canadian National and Alstom SA go up and down completely randomly.
Pair Corralation between Canadian National and Alstom SA
Considering the 90-day investment horizon Canadian National Railway is expected to under-perform the Alstom SA. But the stock apears to be less risky and, when comparing its historical volatility, Canadian National Railway is 2.13 times less risky than Alstom SA. The stock trades about -0.1 of its potential returns per unit of risk. The Alstom SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,841 in Alstom SA on September 4, 2024 and sell it today you would earn a total of 356.00 from holding Alstom SA or generate 19.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian National Railway vs. Alstom SA
Performance |
| Timeline |
| Canadian National Railway |
| Alstom SA |
Canadian National and Alstom SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian National and Alstom SA
The main advantage of trading using opposite Canadian National and Alstom SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian National position performs unexpectedly, Alstom SA 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 Alstom SA will offset losses from the drop in Alstom SA's long position.| Canadian National vs. Union Pacific | Canadian National vs. CSX Corporation | Canadian National vs. Norfolk Southern | Canadian National vs. Westinghouse Air Brake |
| Alstom SA vs. LB Foster | Alstom SA vs. Norfolk Southern | Alstom SA vs. Union Pacific | Alstom SA vs. Canadian Pacific Railway |
Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |