Correlation Between Canadian Utilities and Werner Enterprises

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

Diversification Opportunities for Canadian Utilities and Werner Enterprises

0.46

Correlation Coefficient

Canadian Utilities  Werner Enterprises

Very weak diversification

The 3 months correlation between Canadian and Werner is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Werner Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Werner Enterprises and Canadian Utilities 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 Utilities Limited 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 Utilities i.e., Canadian Utilities and Werner Enterprises go up and down completely randomly.

Pair Corralation between Canadian Utilities and Werner Enterprises

Assuming the 90 days horizon Canadian Utilities Limited is expected to under-perform the Werner Enterprises. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Utilities Limited is 1.6 times less risky than Werner Enterprises. The stock trades about -0.02 of its potential returns per unit of risk. The Werner Enterprises is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,425  in Werner Enterprises on September 28, 2024 and sell it today you would lose (5.00) from holding Werner Enterprises or give up 0.15% of portfolio value over 90 days.

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

Canadian Utilities Limited  vs.  Werner Enterprises

Canadian Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Utilities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Werner Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Werner Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Werner Enterprises is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Canadian Utilities and Werner Enterprises

The main advantage of trading using opposite Canadian Utilities and Werner Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities 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 Utilities Limited 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.