Correlation Between Royal Bank and Canadian Pacific
Can any of the company-specific risk be diversified away by investing in both Royal Bank 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 Royal Bank and Canadian Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Bank of and Canadian Pacific Railway, you can compare the effects of market volatilities on Royal Bank 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 Royal Bank with a short position of Canadian Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Canadian Pacific.
Diversification Opportunities for Royal Bank and Canadian Pacific
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Royal and Canadian is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of 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 Royal Bank 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 Royal Bank of 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 Royal Bank i.e., Royal Bank and Canadian Pacific go up and down completely randomly.
Pair Corralation between Royal Bank and Canadian Pacific
Assuming the 90 days trading horizon Royal Bank of is expected to generate 0.3 times more return on investment than Canadian Pacific. However, Royal Bank of is 3.34 times less risky than Canadian Pacific. It trades about 0.23 of its potential returns per unit of risk. Canadian Pacific Railway is currently generating about -0.08 per unit of risk. If you would invest 2,392 in Royal Bank of on August 31, 2024 and sell it today you would earn a total of 44.00 from holding Royal Bank of or generate 1.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. Canadian Pacific Railway
Performance |
| Timeline |
| Royal Bank |
| Canadian Pacific Railway |
Royal Bank and Canadian Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Canadian Pacific
The main advantage of trading using opposite Royal Bank and Canadian Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank 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.| Royal Bank vs. Manulife Financial Corp | Royal Bank vs. Lion One Metals | Royal Bank vs. Intact Financial Corp | Royal Bank vs. Toronto Dominion Bank |
| Canadian Pacific vs. Canadian National Railway | Canadian Pacific vs. TC Energy Corp | Canadian Pacific vs. Fortis Inc | Canadian Pacific vs. Loblaw Companies Limited |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |