Correlation Between MTR and Canadian National
Can any of the company-specific risk be diversified away by investing in both MTR and Canadian National 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 MTR and Canadian National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTR Limited and Canadian National Railway, you can compare the effects of market volatilities on MTR and Canadian National 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 MTR with a short position of Canadian National. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTR and Canadian National.
Diversification Opportunities for MTR and Canadian National
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between MTR and Canadian is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding MTR Limited and Canadian National Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian National Railway and MTR 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 MTR Limited are associated (or correlated) with Canadian National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian National Railway has no effect on the direction of MTR i.e., MTR and Canadian National go up and down completely randomly.
Pair Corralation between MTR and Canadian National
Assuming the 90 days horizon MTR Limited is expected to generate 1.28 times more return on investment than Canadian National. However, MTR is 1.28 times more volatile than Canadian National Railway. It trades about 0.03 of its potential returns per unit of risk. Canadian National Railway is currently generating about -0.06 per unit of risk. If you would invest 322.00 in MTR Limited on September 26, 2024 and sell it today you would earn a total of 8.00 from holding MTR Limited or generate 2.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MTR Limited vs. Canadian National Railway
Performance |
| Timeline |
| MTR Limited |
| Canadian National Railway |
MTR and Canadian National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MTR and Canadian National
The main advantage of trading using opposite MTR and Canadian National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTR position performs unexpectedly, Canadian National 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 National will offset losses from the drop in Canadian National's long position.| MTR vs. Canadian National Railway | MTR vs. CRRC Limited | MTR vs. Central Japan Railway | MTR vs. East Japan Railway |
| Canadian National vs. MTR Limited | Canadian National vs. CRRC Limited | Canadian National vs. Central Japan Railway | Canadian National vs. East Japan Railway |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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