Correlation Between Trinity Industries and Canadian Pacific
Can any of the company-specific risk be diversified away by investing in both Trinity Industries 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 Trinity Industries and Canadian Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trinity Industries and Canadian Pacific Railway, you can compare the effects of market volatilities on Trinity Industries 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 Trinity Industries with a short position of Canadian Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trinity Industries and Canadian Pacific.
Diversification Opportunities for Trinity Industries and Canadian Pacific
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Trinity and Canadian is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Trinity Industries 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 Trinity Industries 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 Trinity Industries 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 Trinity Industries i.e., Trinity Industries and Canadian Pacific go up and down completely randomly.
Pair Corralation between Trinity Industries and Canadian Pacific
Considering the 90-day investment horizon Trinity Industries is expected to generate 2.51 times more return on investment than Canadian Pacific. However, Trinity Industries is 2.51 times more volatile than Canadian Pacific Railway. It trades about 0.12 of its potential returns per unit of risk. Canadian Pacific Railway is currently generating about -0.22 per unit of risk. If you would invest 3,478 in Trinity Industries on August 23, 2024 and sell it today you would earn a total of 239.00 from holding Trinity Industries or generate 6.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trinity Industries vs. Canadian Pacific Railway
Performance |
| Timeline |
| Trinity Industries |
| Canadian Pacific Railway |
Trinity Industries and Canadian Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trinity Industries and Canadian Pacific
The main advantage of trading using opposite Trinity Industries and Canadian Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trinity Industries 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.| Trinity Industries vs. LB Foster | Trinity Industries vs. Freightcar America | Trinity Industries vs. Westinghouse Air Brake | Trinity Industries vs. Norfolk Southern |
| 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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