Correlation Between Canadian Pacific and Alstom SA
Can any of the company-specific risk be diversified away by investing in both Canadian Pacific 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 Pacific 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 Pacific Railway and Alstom SA, you can compare the effects of market volatilities on Canadian Pacific 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 Pacific with a short position of Alstom SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Pacific and Alstom SA.
Diversification Opportunities for Canadian Pacific and Alstom SA
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Canadian and Alstom is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific 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 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 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 Pacific i.e., Canadian Pacific and Alstom SA go up and down completely randomly.
Pair Corralation between Canadian Pacific and Alstom SA
Allowing for the 90-day total investment horizon Canadian Pacific Railway is expected to under-perform the Alstom SA. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Pacific Railway is 2.49 times less risky than Alstom SA. The stock trades about -0.01 of its potential returns per unit of risk. The Alstom SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,229 in Alstom SA on November 3, 2024 and sell it today you would earn a total of 749.00 from holding Alstom SA or generate 60.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Canadian Pacific Railway vs. Alstom SA
Performance |
| Timeline |
| Canadian Pacific Railway |
| Alstom SA |
Canadian Pacific and Alstom SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Pacific and Alstom SA
The main advantage of trading using opposite Canadian Pacific and Alstom SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Pacific 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 Pacific vs. Union Pacific | Canadian Pacific vs. CSX Corporation | Canadian Pacific vs. Norfolk Southern | Canadian Pacific vs. Westinghouse Air Brake |
| Alstom SA vs. Westinghouse Air Brake | Alstom SA vs. Canadian Pacific Railway | Alstom SA vs. Trinity Industries | Alstom SA vs. CSX Corporation |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes |