Correlation Between Canadian Pacific and Werner Enterprises

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

Diversification Opportunities for Canadian Pacific and Werner Enterprises

-0.65

Correlation Coefficient

Canadian Pacific  Werner Enterprises

Excellent diversification

The 3 months correlation between Canadian and Werner is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and Werner Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Werner Enterprises 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 Werner Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Werner Enterprises has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and Werner Enterprises go up and down completely randomly.

Pair Corralation between Canadian Pacific and Werner Enterprises

Allowing for the 90-day total investment horizon Canadian Pacific Railway is expected to generate 0.8 times more return on investment than Werner Enterprises. However, Canadian Pacific Railway is 1.25 times less risky than Werner Enterprises. It trades about 0.02 of its potential returns per unit of risk. Werner Enterprises is currently generating about 0.01 per unit of risk. If you would invest  7,276  in Canadian Pacific Railway on September 2, 2024 and sell it today you would earn a total of  383.00  from holding Canadian Pacific Railway or generate 5.26% 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.  Werner Enterprises

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.

Werner Enterprises

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Werner Enterprises are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Werner Enterprises may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Canadian Pacific and Werner Enterprises

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

The idea behind Canadian Pacific Railway and Werner Enterprises 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.