Correlation Between Canadian Pacific and Brookfield
Can any of the company-specific risk be diversified away by investing in both Canadian Pacific and Brookfield 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 Pacific and Brookfield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Pacific Railway and Brookfield, you can compare the effects of market volatilities on Canadian Pacific and Brookfield 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 Pacific with a short position of Brookfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Pacific and Brookfield.
Diversification Opportunities for Canadian Pacific and Brookfield
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Canadian and Brookfield is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and Canadian Pacific 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 Pacific Railway are associated (or correlated) with Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and Brookfield go up and down completely randomly.
Pair Corralation between Canadian Pacific and Brookfield
Assuming the 90 days horizon Canadian Pacific is expected to generate 24.76 times less return on investment than Brookfield. But when comparing it to its historical volatility, Canadian Pacific Railway is 1.38 times less risky than Brookfield. It trades about 0.0 of its potential returns per unit of risk. Brookfield is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,710 in Brookfield on August 30, 2024 and sell it today you would earn a total of 3,899 from holding Brookfield or generate 82.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Pacific Railway vs. Brookfield
Performance |
| Timeline |
| Canadian Pacific Railway |
| Brookfield |
Canadian Pacific and Brookfield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Pacific and Brookfield
The main advantage of trading using opposite Canadian Pacific and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Pacific position performs unexpectedly, Brookfield 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 Brookfield will offset losses from the drop in Brookfield's long position.| Canadian Pacific vs. Cielo Waste Solutions | Canadian Pacific vs. Forstrong Global Income | Canadian Pacific vs. Terreno Resources Corp | Canadian Pacific vs. iShares Canadian HYBrid |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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