Correlation Between Canadian Pacific and United Parcel
Can any of the company-specific risk be diversified away by investing in both Canadian Pacific and United Parcel 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 United Parcel 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 United Parcel Service, you can compare the effects of market volatilities on Canadian Pacific and United Parcel 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 United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Pacific and United Parcel.
Diversification Opportunities for Canadian Pacific and United Parcel
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Canadian and United is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and United Parcel go up and down completely randomly.
Pair Corralation between Canadian Pacific and United Parcel
Allowing for the 90-day total investment horizon Canadian Pacific Railway is expected to generate 0.77 times more return on investment than United Parcel. However, Canadian Pacific Railway is 1.3 times less risky than United Parcel. It trades about 0.02 of its potential returns per unit of risk. United Parcel Service is currently generating about -0.01 per unit of risk. If you would invest 7,432 in Canadian Pacific Railway on August 27, 2024 and sell it today you would earn a total of 237.00 from holding Canadian Pacific Railway or generate 3.19% 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. United Parcel Service
Performance |
| Timeline |
| Canadian Pacific Railway |
| United Parcel Service |
Canadian Pacific and United Parcel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Pacific and United Parcel
The main advantage of trading using opposite Canadian Pacific and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Pacific position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel's long position.| Canadian Pacific vs. Union Pacific | Canadian Pacific vs. CSX Corporation | Canadian Pacific vs. Norfolk Southern | Canadian Pacific vs. Westinghouse Air Brake |
| United Parcel vs. Expeditors International of | United Parcel vs. Aquagold International | United Parcel vs. Morningstar Unconstrained Allocation | United Parcel vs. Thrivent High Yield |
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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