Correlation Between Canadian National and Saia

Can any of the company-specific risk be diversified away by investing in both Canadian National and Saia 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 National and Saia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canadian National Railway and Saia Inc, you can compare the effects of market volatilities on Canadian National and Saia 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 National with a short position of Saia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian National and Saia.

Diversification Opportunities for Canadian National and Saia

0.82

Correlation Coefficient

Canadian National  Saia

Very poor diversification

The 3 months correlation between Canadian and Saia is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Canadian National Railway and Saia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saia Inc and Canadian National 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 National Railway are associated (or correlated) with Saia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saia Inc has no effect on the direction of Canadian National i.e., Canadian National and Saia go up and down completely randomly.

Pair Corralation between Canadian National and Saia

Considering the 90-day investment horizon Canadian National Railway is expected to generate 0.62 times more return on investment than Saia. However, Canadian National Railway is 1.62 times less risky than Saia. It trades about -0.2 of its potential returns per unit of risk. Saia Inc is currently generating about -0.23 per unit of risk. If you would invest  13,017  in Canadian National Railway on January 26, 2024 and sell it today you would lose (731.00) from holding Canadian National Railway or give up 5.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Canadian National Railway  vs.  Saia Inc

Canadian National Railway

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian National Railway has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Canadian National is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Saia Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Saia Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward indicators, Saia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian National and Saia

The main advantage of trading using opposite Canadian National and Saia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian National position performs unexpectedly, Saia 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 Saia will offset losses from the drop in Saia's long position.

The idea behind Canadian National Railway and Saia Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.