Correlation Between Canadian Pacific and Telus Corp

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

Diversification Opportunities for Canadian Pacific and Telus Corp

0.26

Correlation Coefficient

Canadian Pacific  Telus Corp

Modest diversification

The 3 months correlation between Canadian and Telus is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and Telus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telus Corp 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 Telus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telus Corp has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and Telus Corp go up and down completely randomly.

Pair Corralation between Canadian Pacific and Telus Corp

Assuming the 90 days horizon Canadian Pacific Railway is expected to under-perform the Telus Corp. In addition to that, Canadian Pacific is 1.27 times more volatile than Telus Corp. It trades about -0.03 of its total potential returns per unit of risk. Telus Corp is currently generating about 0.1 per unit of volatility. If you would invest  1,898  in Telus Corp on December 29, 2024 and sell it today you would earn a total of  146.00  from holding Telus Corp or generate 7.69% return on investment over 90 days.

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

Canadian Pacific Railway  vs.  Telus Corp

Canadian Pacific Railway

Risk-Adjusted Performance

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.

Telus Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telus Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Telus Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Canadian Pacific and Telus Corp

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

The idea behind Canadian Pacific Railway and Telus Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.