Correlation Between Canadian Pacific and BEST

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

Diversification Opportunities for Canadian Pacific and BEST

-0.73

Correlation Coefficient

Canadian Pacific  BEST

Pay attention - limited upside

The 3 months correlation between Canadian and BEST is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and BEST Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEST Inc 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 BEST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BEST Inc has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and BEST go up and down completely randomly.

Pair Corralation between Canadian Pacific and BEST

Allowing for the 90-day total investment horizon Canadian Pacific is expected to generate 2.18 times less return on investment than BEST. In addition to that, Canadian Pacific is 4.05 times more volatile than BEST Inc. It trades about 0.03 of its total potential returns per unit of risk. BEST Inc is currently generating about 0.22 per unit of volatility. If you would invest  265.00  in BEST Inc on December 28, 2024 and sell it today you would earn a total of  13.00  from holding BEST Inc or generate 4.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	78.33%
Values	Daily Returns

Canadian Pacific Railway  vs.  BEST Inc

Canadian Pacific Railway

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Pacific Railway are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

BEST Inc

Risk-Adjusted Performance

Solid

Over the last 90 days BEST Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively unsteady basic indicators, BEST may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Canadian Pacific and BEST

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

The idea behind Canadian Pacific Railway and BEST 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.