Correlation Between Canadian Pacific and Old Dominion
Can any of the company-specific risk be diversified away by investing in both Canadian Pacific and Old Dominion 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 Old Dominion 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 Old Dominion Freight, you can compare the effects of market volatilities on Canadian Pacific and Old Dominion 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 Old Dominion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Pacific and Old Dominion.
Diversification Opportunities for Canadian Pacific and Old Dominion
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Canadian and Old is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and Old Dominion Freight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Dominion Freight 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 Old Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Dominion Freight has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and Old Dominion go up and down completely randomly.
Pair Corralation between Canadian Pacific and Old Dominion
Allowing for the 90-day total investment horizon Canadian Pacific Railway is expected to under-perform the Old Dominion. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Pacific Railway is 2.49 times less risky than Old Dominion. The stock trades about -0.02 of its potential returns per unit of risk. The Old Dominion Freight is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 19,779 in Old Dominion Freight on August 26, 2024 and sell it today you would earn a total of 2,246 from holding Old Dominion Freight or generate 11.36% 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. Old Dominion Freight
Performance |
| Timeline |
| Canadian Pacific Railway |
| Old Dominion Freight |
Canadian Pacific and Old Dominion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Pacific and Old Dominion
The main advantage of trading using opposite Canadian Pacific and Old Dominion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Pacific position performs unexpectedly, Old Dominion 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 Old Dominion will offset losses from the drop in Old Dominion's long position.| Canadian Pacific vs. Union Pacific | Canadian Pacific vs. CSX Corporation | Canadian Pacific vs. Norfolk Southern | Canadian Pacific vs. Westinghouse Air Brake |
| Old Dominion vs. ArcBest Corp | Old Dominion vs. Marten Transport | Old Dominion vs. Werner Enterprises | Old Dominion vs. Knight Transportation |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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