Correlation Between Guangshen Railway and Canadian Pacific
Can any of the company-specific risk be diversified away by investing in both Guangshen Railway 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 Guangshen Railway and Canadian Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangshen Railway and Canadian Pacific Railway, you can compare the effects of market volatilities on Guangshen Railway 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 Guangshen Railway with a short position of Canadian Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangshen Railway and Canadian Pacific.
Diversification Opportunities for Guangshen Railway and Canadian Pacific
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Guangshen and Canadian is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Guangshen Railway 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 Guangshen Railway 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 Guangshen Railway 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 Guangshen Railway i.e., Guangshen Railway and Canadian Pacific go up and down completely randomly.
Pair Corralation between Guangshen Railway and Canadian Pacific
Assuming the 90 days horizon Guangshen Railway is expected to generate 7.7 times more return on investment than Canadian Pacific. However, Guangshen Railway is 7.7 times more volatile than Canadian Pacific Railway. It trades about 0.07 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 15.00 in Guangshen Railway on September 12, 2024 and sell it today you would earn a total of 9.00 from holding Guangshen Railway or generate 60.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 52.87% |
| Values | Daily Returns |
Guangshen Railway vs. Canadian Pacific Railway
Performance |
| Timeline |
| Guangshen Railway |
| Canadian Pacific Railway |
Guangshen Railway and Canadian Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangshen Railway and Canadian Pacific
The main advantage of trading using opposite Guangshen Railway and Canadian Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangshen Railway 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.| Guangshen Railway vs. Trinity Industries | Guangshen Railway vs. CSX Corporation | Guangshen Railway vs. Norfolk Southern | Guangshen Railway vs. Greenbrier Companies |
| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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