Correlation Between Canadian Pacific and NL Industries
Can any of the company-specific risk be diversified away by investing in both Canadian Pacific and NL Industries 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 NL Industries 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 NL Industries, you can compare the effects of market volatilities on Canadian Pacific and NL Industries 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 NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Pacific and NL Industries.
Diversification Opportunities for Canadian Pacific and NL Industries
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Canadian and NL Industries is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries 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 NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and NL Industries go up and down completely randomly.
Pair Corralation between Canadian Pacific and NL Industries
Allowing for the 90-day total investment horizon Canadian Pacific Railway is expected to under-perform the NL Industries. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Pacific Railway is 2.8 times less risky than NL Industries. The stock trades about -0.1 of its potential returns per unit of risk. The NL Industries is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 788.00 in NL Industries on August 30, 2024 and sell it today you would earn a total of 9.00 from holding NL Industries or generate 1.14% 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. NL Industries
Performance |
| Timeline |
| Canadian Pacific Railway |
| NL Industries |
Canadian Pacific and NL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Pacific and NL Industries
The main advantage of trading using opposite Canadian Pacific and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Pacific position performs unexpectedly, NL Industries 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 NL Industries will offset losses from the drop in NL Industries' long position.| Canadian Pacific vs. Union Pacific | Canadian Pacific vs. CSX Corporation | Canadian Pacific vs. Westinghouse Air Brake | Canadian Pacific vs. Canadian National Railway |
| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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