Correlation Between Canadian National and China Railway
Can any of the company-specific risk be diversified away by investing in both Canadian National and China Railway 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 China Railway 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 China Railway Signal, you can compare the effects of market volatilities on Canadian National and China Railway 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 China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian National and China Railway.
Diversification Opportunities for Canadian National and China Railway
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Canadian and China is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Canadian National Railway and China Railway Signal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Signal 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 China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Signal has no effect on the direction of Canadian National i.e., Canadian National and China Railway go up and down completely randomly.
Pair Corralation between Canadian National and China Railway
Assuming the 90 days horizon Canadian National Railway is expected to under-perform the China Railway. But the stock apears to be less risky and, when comparing its historical volatility, Canadian National Railway is 1.95 times less risky than China Railway. The stock trades about -0.04 of its potential returns per unit of risk. The China Railway Signal is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 34.00 in China Railway Signal on October 22, 2024 and sell it today you would earn a total of 4.00 from holding China Railway Signal or generate 11.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Canadian National Railway vs. China Railway Signal
Performance |
Timeline |
Canadian National Railway |
China Railway Signal |
Canadian National and China Railway Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Canadian National and China Railway
The main advantage of trading using opposite Canadian National and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian National position performs unexpectedly, China Railway 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 China Railway will offset losses from the drop in China Railway's long position.Canadian National vs. DXC Technology Co | Canadian National vs. Liberty Broadband | Canadian National vs. Air Transport Services | Canadian National vs. BII Railway Transportation |
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Check out your portfolio center.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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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