Correlation Between Canadian Pacific and CoreCivic

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

Diversification Opportunities for Canadian Pacific and CoreCivic

-0.25

Correlation Coefficient

Canadian Pacific  CoreCivic

Very good diversification

The 3 months correlation between Canadian and CoreCivic is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and CoreCivic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoreCivic 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 CoreCivic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoreCivic has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and CoreCivic go up and down completely randomly.

Pair Corralation between Canadian Pacific and CoreCivic

Allowing for the 90-day total investment horizon Canadian Pacific Railway is expected to generate 0.77 times more return on investment than CoreCivic. However, Canadian Pacific Railway is 1.29 times less risky than CoreCivic. It trades about -0.02 of its potential returns per unit of risk. CoreCivic is currently generating about -0.03 per unit of risk. If you would invest  7,196  in Canadian Pacific Railway on December 29, 2024 and sell it today you would lose (254.00) from holding Canadian Pacific Railway or give up 3.53% of portfolio value over 90 days.

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

Canadian Pacific Railway  vs.  CoreCivic

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.

CoreCivic

Risk-Adjusted Performance

Very Weak

Over the last 90 days CoreCivic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CoreCivic is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Canadian Pacific and CoreCivic

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

The idea behind Canadian Pacific Railway and CoreCivic 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.