Correlation Between Canadian Pacific and GMxico Transportes

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

Diversification Opportunities for Canadian Pacific and GMxico Transportes

-0.7

Correlation Coefficient

Canadian Pacific  GMxico Transportes

Excellent diversification

The 3 months correlation between Canadian and GMxico is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and GMxico Transportes SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMxico Transportes SAB 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 GMxico Transportes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMxico Transportes SAB has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and GMxico Transportes go up and down completely randomly.

Pair Corralation between Canadian Pacific and GMxico Transportes

Allowing for the 90-day total investment horizon Canadian Pacific Railway is expected to generate 1.55 times more return on investment than GMxico Transportes. However, Canadian Pacific is 1.55 times more volatile than GMxico Transportes SAB. It trades about 0.04 of its potential returns per unit of risk. GMxico Transportes SAB is currently generating about -0.16 per unit of risk. If you would invest  7,544  in Canadian Pacific Railway on October 10, 2024 and sell it today you would earn a total of  76.00  from holding Canadian Pacific Railway or generate 1.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Canadian Pacific Railway  vs.  GMxico Transportes SAB

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. 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.

GMxico Transportes SAB

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GMxico Transportes SAB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, GMxico Transportes reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Pacific and GMxico Transportes

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

The idea behind Canadian Pacific Railway and GMxico Transportes SAB 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.