Correlation Between Dollarama and Canadian Pacific
Can any of the company-specific risk be diversified away by investing in both Dollarama and Canadian Pacific 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 Dollarama and Canadian Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollarama and Canadian Pacific Railway, you can compare the effects of market volatilities on Dollarama and Canadian Pacific 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 Dollarama with a short position of Canadian Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollarama and Canadian Pacific.
Diversification Opportunities for Dollarama and Canadian Pacific
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dollarama and Canadian is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dollarama and Canadian Pacific Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Pacific Railway and Dollarama 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 Dollarama are associated (or correlated) with Canadian Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Pacific Railway has no effect on the direction of Dollarama i.e., Dollarama and Canadian Pacific go up and down completely randomly.
Pair Corralation between Dollarama and Canadian Pacific
Assuming the 90 days trading horizon Dollarama is expected to generate 1.04 times more return on investment than Canadian Pacific. However, Dollarama is 1.04 times more volatile than Canadian Pacific Railway. It trades about 0.1 of its potential returns per unit of risk. Canadian Pacific Railway is currently generating about 0.0 per unit of risk. If you would invest 8,193 in Dollarama on August 30, 2024 and sell it today you would earn a total of 6,186 from holding Dollarama or generate 75.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dollarama vs. Canadian Pacific Railway
Performance |
| Timeline |
| Dollarama |
| Canadian Pacific Railway |
Dollarama and Canadian Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollarama and Canadian Pacific
The main advantage of trading using opposite Dollarama and Canadian Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollarama position performs unexpectedly, Canadian Pacific 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 Canadian Pacific will offset losses from the drop in Canadian Pacific's long position.| Dollarama vs. Canadian Tire | Dollarama vs. Loblaw Companies Limited | Dollarama vs. Metro Inc | Dollarama vs. Canadian National Railway |
| Canadian Pacific vs. Cielo Waste Solutions | Canadian Pacific vs. Forstrong Global Income | Canadian Pacific vs. Terreno Resources Corp | Canadian Pacific vs. iShares Canadian HYBrid |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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