Correlation Between Canadian National and STRA Hannoversche

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

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

Diversification Opportunities for Canadian National and STRA Hannoversche

0.04

Correlation Coefficient

Canadian National  STRA Hannoversche

Significant diversification

The 3 months correlation between Canadian and STRA is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Canadian National Railway and STRA Hannoversche Verkehrsbetr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRA Hannoversche and Canadian National 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 National Railway are associated (or correlated) with STRA Hannoversche. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRA Hannoversche has no effect on the direction of Canadian National i.e., Canadian National and STRA Hannoversche go up and down completely randomly.

Pair Corralation between Canadian National and STRA Hannoversche

Assuming the 90 days horizon Canadian National Railway is expected to generate 0.34 times more return on investment than STRA Hannoversche. However, Canadian National Railway is 2.95 times less risky than STRA Hannoversche. It trades about 0.0 of its potential returns per unit of risk. STRA Hannoversche Verkehrsbetriebe is currently generating about 0.0 per unit of risk. If you would invest  9,753  in Canadian National Railway on September 26, 2024 and sell it today you would lose (31.00) from holding Canadian National Railway or give up 0.32% of portfolio value over 90 days.

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

Canadian National Railway  vs.  STRA Hannoversche Verkehrsbetr

Canadian National Railway

Risk-Adjusted Performance

0 of 100

Very Weak

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

STRA Hannoversche

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STRA Hannoversche Verkehrsbetriebe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Canadian National and STRA Hannoversche

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

The idea behind Canadian National Railway and STRA Hannoversche Verkehrsbetriebe 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.