Correlation Between Baylin Technologies and Canadian Pacific

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

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

Diversification Opportunities for Baylin Technologies and Canadian Pacific

-0.59

Correlation Coefficient

Baylin Technologies  Canadian Pacific

Excellent diversification

The 3 months correlation between Baylin and Canadian is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Baylin Technologies 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 Baylin Technologies 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 Baylin Technologies 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 Baylin Technologies i.e., Baylin Technologies and Canadian Pacific go up and down completely randomly.

Pair Corralation between Baylin Technologies and Canadian Pacific

Assuming the 90 days trading horizon Baylin Technologies is expected to under-perform the Canadian Pacific. In addition to that, Baylin Technologies is 2.9 times more volatile than Canadian Pacific Railway. It trades about -0.22 of its total potential returns per unit of risk. Canadian Pacific Railway is currently generating about -0.04 per unit of volatility. If you would invest  10,890  in Canadian Pacific Railway on December 4, 2024 and sell it today you would lose (141.00) from holding Canadian Pacific Railway or give up 1.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Baylin Technologies  vs.  Canadian Pacific Railway

Baylin Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baylin Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Canadian Pacific Railway

Risk-Adjusted Performance

Weak

Over the last 90 days Canadian Pacific Railway has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Canadian Pacific is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Baylin Technologies and Canadian Pacific

The main advantage of trading using opposite Baylin Technologies and Canadian Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baylin Technologies 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.

The idea behind Baylin Technologies and Canadian Pacific Railway 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.