Correlation Between Canadian Pacific and AerSale Corp

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

Diversification Opportunities for Canadian Pacific and AerSale Corp

-0.2

Correlation Coefficient

Canadian Pacific  AerSale Corp

Good diversification

The 3 months correlation between Canadian and AerSale is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and AerSale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerSale 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 AerSale Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerSale Corp has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and AerSale Corp go up and down completely randomly.

Pair Corralation between Canadian Pacific and AerSale Corp

Allowing for the 90-day total investment horizon Canadian Pacific Railway is expected to under-perform the AerSale Corp. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Pacific Railway is 1.43 times less risky than AerSale Corp. The stock trades about -0.02 of its potential returns per unit of risk. The AerSale Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  615.00  in AerSale Corp on December 29, 2024 and sell it today you would earn a total of  166.00  from holding AerSale Corp or generate 26.99% return on investment over 90 days.

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

Canadian Pacific Railway  vs.  AerSale 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. Even with relatively invariable basic indicators, Canadian Pacific is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

AerSale Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AerSale Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, AerSale Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Pacific and AerSale Corp

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

The idea behind Canadian Pacific Railway and AerSale 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.