Correlation Between Canadian National and United Parcel
Can any of the company-specific risk be diversified away by investing in both Canadian National and United Parcel 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 United Parcel 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 United Parcel Service, you can compare the effects of market volatilities on Canadian National and United Parcel 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 United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian National and United Parcel.
Diversification Opportunities for Canadian National and United Parcel
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Canadian and United is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Canadian National Railway and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Canadian National i.e., Canadian National and United Parcel go up and down completely randomly.
Pair Corralation between Canadian National and United Parcel
Considering the 90-day investment horizon Canadian National Railway is expected to generate 0.4 times more return on investment than United Parcel. However, Canadian National Railway is 2.5 times less risky than United Parcel. It trades about -0.09 of its potential returns per unit of risk. United Parcel Service is currently generating about -0.11 per unit of risk. If you would invest 10,854 in Canadian National Railway on November 3, 2024 and sell it today you would lose (403.00) from holding Canadian National Railway or give up 3.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian National Railway vs. United Parcel Service
Performance |
| Timeline |
| Canadian National Railway |
| United Parcel Service |
Canadian National and United Parcel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian National and United Parcel
The main advantage of trading using opposite Canadian National and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian National position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel's long position.| Canadian National vs. Union Pacific | Canadian National vs. CSX Corporation | Canadian National vs. Norfolk Southern | Canadian National vs. Westinghouse Air Brake |
| United Parcel vs. GXO Logistics | United Parcel vs. JB Hunt Transport | United Parcel vs. Expeditors International of | United Parcel vs. CH Robinson Worldwide |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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