Correlation Between Canadian Pacific and SBC Medical

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

Diversification Opportunities for Canadian Pacific and SBC Medical

-0.74

Correlation Coefficient

Canadian Pacific  SBC Medical

Pay attention - limited upside

The 3 months correlation between Canadian and SBC is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and SBC Medical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBC Medical Group 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 SBC Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBC Medical Group has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and SBC Medical go up and down completely randomly.

Pair Corralation between Canadian Pacific and SBC Medical

Allowing for the 90-day total investment horizon Canadian Pacific is expected to generate 568.86 times less return on investment than SBC Medical. But when comparing it to its historical volatility, Canadian Pacific Railway is 10.09 times less risky than SBC Medical. It trades about 0.0 of its potential returns per unit of risk. SBC Medical Group is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  7.31  in SBC Medical Group on September 19, 2024 and sell it today you would earn a total of  18.69  from holding SBC Medical Group or generate 255.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	13.1%
Values	Daily Returns

Canadian Pacific Railway  vs.  SBC Medical Group

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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

SBC Medical Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBC Medical Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SBC Medical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canadian Pacific and SBC Medical

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

The idea behind Canadian Pacific Railway and SBC Medical Group 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.