Correlation Between Canadian Pacific and Greenbrier Companies
Can any of the company-specific risk be diversified away by investing in both Canadian Pacific and Greenbrier Companies 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 Canadian Pacific and Greenbrier Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Pacific Railway and Greenbrier Companies, you can compare the effects of market volatilities on Canadian Pacific and Greenbrier Companies 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 Canadian Pacific with a short position of Greenbrier Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Pacific and Greenbrier Companies.
Diversification Opportunities for Canadian Pacific and Greenbrier Companies
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canadian and Greenbrier is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and Greenbrier Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenbrier Companies and Canadian Pacific 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 Canadian Pacific Railway are associated (or correlated) with Greenbrier Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenbrier Companies has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and Greenbrier Companies go up and down completely randomly.
Pair Corralation between Canadian Pacific and Greenbrier Companies
Allowing for the 90-day total investment horizon Canadian Pacific Railway is expected to under-perform the Greenbrier Companies. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Pacific Railway is 2.17 times less risky than Greenbrier Companies. The stock trades about -0.31 of its potential returns per unit of risk. The Greenbrier Companies is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,924 in Greenbrier Companies on January 20, 2024 and sell it today you would earn a total of 202.00 from holding Greenbrier Companies or generate 4.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Pacific Railway vs. Greenbrier Companies
Performance |
| Timeline |
| Canadian Pacific Railway |
| Greenbrier Companies |
Canadian Pacific and Greenbrier Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Pacific and Greenbrier Companies
The main advantage of trading using opposite Canadian Pacific and Greenbrier Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Pacific position performs unexpectedly, Greenbrier Companies 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 Greenbrier Companies will offset losses from the drop in Greenbrier Companies' long position.| Canadian Pacific vs. Union Pacific | Canadian Pacific vs. CSX Corporation | Canadian Pacific vs. Norfolk Southern | Canadian Pacific vs. Westinghouse Air Brake |
| Greenbrier Companies vs. LB Foster | Greenbrier Companies vs. CSX Corporation | Greenbrier Companies vs. Norfolk Southern | Greenbrier Companies vs. Union Pacific |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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