Correlation Between Canadian Pacific and RBC Bearings
Can any of the company-specific risk be diversified away by investing in both Canadian Pacific and RBC Bearings 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 RBC Bearings 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 RBC Bearings Incorporated, you can compare the effects of market volatilities on Canadian Pacific and RBC Bearings 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 RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Pacific and RBC Bearings.
Diversification Opportunities for Canadian Pacific and RBC Bearings
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Canadian and RBC is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings 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 RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and RBC Bearings go up and down completely randomly.
Pair Corralation between Canadian Pacific and RBC Bearings
Allowing for the 90-day total investment horizon Canadian Pacific Railway is expected to under-perform the RBC Bearings. In addition to that, Canadian Pacific is 1.07 times more volatile than RBC Bearings Incorporated. It trades about -0.01 of its total potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.01 per unit of volatility. If you would invest 32,013 in RBC Bearings Incorporated on September 18, 2024 and sell it today you would earn a total of 36.00 from holding RBC Bearings Incorporated or generate 0.11% 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. RBC Bearings Incorporated
Performance |
| Timeline |
| Canadian Pacific Railway |
| RBC Bearings |
Canadian Pacific and RBC Bearings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Pacific and RBC Bearings
The main advantage of trading using opposite Canadian Pacific and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Pacific position performs unexpectedly, RBC Bearings 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 RBC Bearings will offset losses from the drop in RBC Bearings' long position.| Canadian Pacific vs. Union Pacific | Canadian Pacific vs. CSX Corporation | Canadian Pacific vs. Norfolk Southern | Canadian Pacific vs. Westinghouse Air Brake |
| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Kennametal | RBC Bearings vs. Toro Co | RBC Bearings vs. Snap On |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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