Correlation Between Curtiss Wright and Canadian Pacific

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

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

Diversification Opportunities for Curtiss Wright and Canadian Pacific

-0.02

Correlation Coefficient

Curtiss Wright  Canadian Pacific

Good diversification

The 3 months correlation between Curtiss and Canadian is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Curtiss Wright 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 Curtiss Wright 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 Curtiss Wright 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 Curtiss Wright i.e., Curtiss Wright and Canadian Pacific go up and down completely randomly.

Pair Corralation between Curtiss Wright and Canadian Pacific

Allowing for the 90-day total investment horizon Curtiss Wright is expected to under-perform the Canadian Pacific. In addition to that, Curtiss Wright is 1.23 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 0.01 per unit of volatility. If you would invest  7,301  in Canadian Pacific Railway on December 25, 2024 and sell it today you would earn a total of  28.00  from holding Canadian Pacific Railway or generate 0.38% return on investment over 90 days.

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

Curtiss Wright  vs.  Canadian Pacific Railway

Curtiss Wright

Risk-Adjusted Performance

Very Weak

Over the last 90 days Curtiss Wright has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Canadian Pacific Railway

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Pacific Railway are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Canadian Pacific is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Curtiss Wright and Canadian Pacific

The main advantage of trading using opposite Curtiss Wright and Canadian Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Curtiss Wright 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 Curtiss Wright 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.