Correlation Between Canadian Pacific and Knight Transportation
Can any of the company-specific risk be diversified away by investing in both Canadian Pacific and Knight Transportation 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 Knight Transportation 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 Knight Transportation, you can compare the effects of market volatilities on Canadian Pacific and Knight Transportation 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 Knight Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Pacific and Knight Transportation.
Diversification Opportunities for Canadian Pacific and Knight Transportation
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Canadian and Knight is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and Knight Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Transportation 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 Knight Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knight Transportation has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and Knight Transportation go up and down completely randomly.
Pair Corralation between Canadian Pacific and Knight Transportation
Allowing for the 90-day total investment horizon Canadian Pacific Railway is expected to under-perform the Knight Transportation. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Pacific Railway is 1.4 times less risky than Knight Transportation. The stock trades about -0.03 of its potential returns per unit of risk. The Knight Transportation is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 5,581 in Knight Transportation on August 27, 2024 and sell it today you would earn a total of 181.00 from holding Knight Transportation or generate 3.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Pacific Railway vs. Knight Transportation
Performance |
| Timeline |
| Canadian Pacific Railway |
| Knight Transportation |
Canadian Pacific and Knight Transportation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Pacific and Knight Transportation
The main advantage of trading using opposite Canadian Pacific and Knight Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Pacific position performs unexpectedly, Knight Transportation 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 Knight Transportation will offset losses from the drop in Knight Transportation's long position.| Canadian Pacific vs. Union Pacific | Canadian Pacific vs. CSX Corporation | Canadian Pacific vs. Norfolk Southern | Canadian Pacific vs. Westinghouse Air Brake |
| Knight Transportation vs. Marten Transport | Knight Transportation vs. Heartland Express | Knight Transportation vs. Universal Logistics Holdings | Knight Transportation vs. Schneider National |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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