Correlation Between Canadian Pacific and RXO
Can any of the company-specific risk be diversified away by investing in both Canadian Pacific and RXO 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 RXO 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 RXO Inc, you can compare the effects of market volatilities on Canadian Pacific and RXO 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 RXO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Pacific and RXO.
Diversification Opportunities for Canadian Pacific and RXO
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Canadian and RXO is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and RXO Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RXO Inc 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 RXO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RXO Inc has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and RXO go up and down completely randomly.
Pair Corralation between Canadian Pacific and RXO
Allowing for the 90-day total investment horizon Canadian Pacific Railway is expected to generate 0.71 times more return on investment than RXO. However, Canadian Pacific Railway is 1.4 times less risky than RXO. It trades about 0.37 of its potential returns per unit of risk. RXO Inc is currently generating about 0.18 per unit of risk. If you would invest 7,237 in Canadian Pacific Railway on November 1, 2024 and sell it today you would earn a total of 920.50 from holding Canadian Pacific Railway or generate 12.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Pacific Railway vs. RXO Inc
Performance |
| Timeline |
| Canadian Pacific Railway |
| RXO Inc |
Canadian Pacific and RXO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Pacific and RXO
The main advantage of trading using opposite Canadian Pacific and RXO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Pacific position performs unexpectedly, RXO 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 RXO will offset losses from the drop in RXO's long position.| Canadian Pacific vs. Union Pacific | Canadian Pacific vs. CSX Corporation | Canadian Pacific vs. Norfolk Southern | Canadian Pacific vs. Westinghouse Air Brake |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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