Correlation Between Restaurant Brands and Canadian National
Can any of the company-specific risk be diversified away by investing in both Restaurant Brands 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 Restaurant Brands and Canadian National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Restaurant Brands International and Canadian National Railway, you can compare the effects of market volatilities on Restaurant Brands 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 Restaurant Brands with a short position of Canadian National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Restaurant Brands and Canadian National.
Diversification Opportunities for Restaurant Brands and Canadian National
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Restaurant and Canadian is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa 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 Restaurant Brands 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 Restaurant Brands International 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 Restaurant Brands i.e., Restaurant Brands and Canadian National go up and down completely randomly.
Pair Corralation between Restaurant Brands and Canadian National
Assuming the 90 days trading horizon Restaurant Brands International is expected to under-perform the Canadian National. But the stock apears to be less risky and, when comparing its historical volatility, Restaurant Brands International is 1.29 times less risky than Canadian National. The stock trades about -0.05 of its potential returns per unit of risk. The Canadian National Railway is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 15,450 in Canadian National Railway on August 28, 2024 and sell it today you would earn a total of 179.00 from holding Canadian National Railway or generate 1.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Restaurant Brands Internationa vs. Canadian National Railway
Performance |
| Timeline |
| Restaurant Brands |
| Canadian National Railway |
Restaurant Brands and Canadian National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Restaurant Brands and Canadian National
The main advantage of trading using opposite Restaurant Brands and Canadian National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant Brands 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.| Restaurant Brands vs. Canadian Tire | Restaurant Brands vs. Dollarama | Restaurant Brands vs. Nutrien | Restaurant Brands vs. Magna International |
| Canadian National vs. Canadian Pacific Railway | Canadian National vs. Fortis Inc | Canadian National vs. BCE Inc | Canadian National vs. Telus Corp |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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