Correlation Between Capri Holdings and Canadian Pacific

Can any of the company-specific risk be diversified away by investing in both Capri Holdings and Canadian Pacific 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 Capri Holdings and Canadian Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capri Holdings and Canadian Pacific Railway, you can compare the effects of market volatilities on Capri Holdings and Canadian Pacific 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 Capri Holdings with a short position of Canadian Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capri Holdings and Canadian Pacific.

Diversification Opportunities for Capri Holdings and Canadian Pacific

0.75

Correlation Coefficient

Capri Holdings  Canadian Pacific

Poor diversification

The 3 months correlation between Capri and Canadian is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and Canadian Pacific Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Pacific Railway and Capri Holdings 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 Capri Holdings are associated (or correlated) with Canadian Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Pacific Railway has no effect on the direction of Capri Holdings i.e., Capri Holdings and Canadian Pacific go up and down completely randomly.

Pair Corralation between Capri Holdings and Canadian Pacific

Given the investment horizon of 90 days Capri Holdings is expected to under-perform the Canadian Pacific. In addition to that, Capri Holdings is 5.67 times more volatile than Canadian Pacific Railway. It trades about -0.05 of its total potential returns per unit of risk. Canadian Pacific Railway is currently generating about -0.12 per unit of volatility. If you would invest  8,280  in Canadian Pacific Railway on August 30, 2024 and sell it today you would lose (745.00) from holding Canadian Pacific Railway or give up 9.0% of portfolio value over 90 days.

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

Capri Holdings  vs.  Canadian Pacific Railway

Capri Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capri Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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.

Pair Trading with Capri Holdings and Canadian Pacific

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

The idea behind Capri Holdings and Canadian Pacific Railway 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.