Correlation Between Canadian Pacific and RB Global

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

Diversification Opportunities for Canadian Pacific and RB Global

-0.68

Correlation Coefficient

Canadian Pacific  RB Global

Excellent diversification

The 3 months correlation between Canadian and RBA is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and RB Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RB Global 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 RB Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RB Global has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and RB Global go up and down completely randomly.

Pair Corralation between Canadian Pacific and RB Global

Allowing for the 90-day total investment horizon Canadian Pacific Railway is expected to under-perform the RB Global. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Pacific Railway is 1.23 times less risky than RB Global. The stock trades about -0.12 of its potential returns per unit of risk. The RB Global is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  8,613  in RB Global on August 30, 2024 and sell it today you would earn a total of  1,155  from holding RB Global or generate 13.41% return on investment over 90 days.

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

Canadian Pacific Railway  vs.  RB Global

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 latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

RB Global

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RB Global are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, RB Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Pacific and RB Global

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

The idea behind Canadian Pacific Railway and RB Global 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.