Correlation Between Canadian Pacific and Mullen

Can any of the company-specific risk be diversified away by investing in both Canadian Pacific and Mullen 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 Mullen 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 Mullen Group, you can compare the effects of market volatilities on Canadian Pacific and Mullen 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 Mullen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Pacific and Mullen.

Diversification Opportunities for Canadian Pacific and Mullen

-0.54

Correlation Coefficient

Canadian Pacific  Mullen

Excellent diversification

The 3 months correlation between Canadian and Mullen is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and Mullen Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mullen Group 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 Mullen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mullen Group has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and Mullen go up and down completely randomly.

Pair Corralation between Canadian Pacific and Mullen

Assuming the 90 days horizon Canadian Pacific Railway is expected to generate 1.18 times more return on investment than Mullen. However, Canadian Pacific is 1.18 times more volatile than Mullen Group. It trades about 0.1 of its potential returns per unit of risk. Mullen Group is currently generating about -0.2 per unit of risk. If you would invest  10,697  in Canadian Pacific Railway on October 9, 2024 and sell it today you would earn a total of  244.00  from holding Canadian Pacific Railway or generate 2.28% return on investment over 90 days.

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

Canadian Pacific Railway  vs.  Mullen Group

Canadian Pacific Railway

Risk-Adjusted Performance

0 of 100

Very 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.

Mullen Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mullen Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Mullen may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Canadian Pacific and Mullen

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

The idea behind Canadian Pacific Railway and Mullen Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.