Correlation Between Canadian Pacific and Vanguard Industrials
Can any of the company-specific risk be diversified away by investing in both Canadian Pacific and Vanguard Industrials 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 Vanguard Industrials 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 Vanguard Industrials Index, you can compare the effects of market volatilities on Canadian Pacific and Vanguard Industrials 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 Vanguard Industrials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Pacific and Vanguard Industrials.
Diversification Opportunities for Canadian Pacific and Vanguard Industrials
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Canadian and Vanguard is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and Vanguard Industrials Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Industrials 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 Vanguard Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Industrials has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and Vanguard Industrials go up and down completely randomly.
Pair Corralation between Canadian Pacific and Vanguard Industrials
Allowing for the 90-day total investment horizon Canadian Pacific is expected to generate 10.1 times less return on investment than Vanguard Industrials. In addition to that, Canadian Pacific is 1.39 times more volatile than Vanguard Industrials Index. It trades about 0.01 of its total potential returns per unit of risk. Vanguard Industrials Index is currently generating about 0.1 per unit of volatility. If you would invest 9,616 in Vanguard Industrials Index on August 24, 2024 and sell it today you would earn a total of 4,215 from holding Vanguard Industrials Index or generate 43.83% 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. Vanguard Industrials Index
Performance |
| Timeline |
| Canadian Pacific Railway |
| Vanguard Industrials |
Canadian Pacific and Vanguard Industrials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Pacific and Vanguard Industrials
The main advantage of trading using opposite Canadian Pacific and Vanguard Industrials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Pacific position performs unexpectedly, Vanguard Industrials 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 Vanguard Industrials will offset losses from the drop in Vanguard Industrials' 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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