Correlation Between Canadian Pacific and CGI
Can any of the company-specific risk be diversified away by investing in both Canadian Pacific and CGI 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 CGI 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 CGI Inc, you can compare the effects of market volatilities on Canadian Pacific and CGI 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 CGI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Pacific and CGI.
Diversification Opportunities for Canadian Pacific and CGI
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Canadian and CGI is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and CGI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGI Inc 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 CGI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGI Inc has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and CGI go up and down completely randomly.
Pair Corralation between Canadian Pacific and CGI
Assuming the 90 days horizon Canadian Pacific is expected to generate 7.85 times less return on investment than CGI. In addition to that, Canadian Pacific is 1.1 times more volatile than CGI Inc. It trades about 0.01 of its total potential returns per unit of risk. CGI Inc is currently generating about 0.06 per unit of volatility. If you would invest 11,603 in CGI Inc on August 27, 2024 and sell it today you would earn a total of 4,006 from holding CGI Inc or generate 34.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Pacific Railway vs. CGI Inc
Performance |
| Timeline |
| Canadian Pacific Railway |
| CGI Inc |
Canadian Pacific and CGI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Pacific and CGI
The main advantage of trading using opposite Canadian Pacific and CGI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Pacific position performs unexpectedly, CGI 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 CGI will offset losses from the drop in CGI's long position.| Canadian Pacific vs. Canadian National Railway | Canadian Pacific vs. TC Energy Corp | Canadian Pacific vs. Fortis Inc | Canadian Pacific vs. Loblaw Companies Limited |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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