Correlation Between Greenbrier Companies and Canadian Pacific

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

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

Diversification Opportunities for Greenbrier Companies and Canadian Pacific

0.44

Correlation Coefficient

Greenbrier Companies  Canadian Pacific

Very weak diversification

The 3 months correlation between Greenbrier and Canadian is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Greenbrier Companies 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 Greenbrier Companies 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 Greenbrier Companies 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 Greenbrier Companies i.e., Greenbrier Companies and Canadian Pacific go up and down completely randomly.

Pair Corralation between Greenbrier Companies and Canadian Pacific

Considering the 90-day investment horizon Greenbrier Companies is expected to under-perform the Canadian Pacific. In addition to that, Greenbrier Companies is 1.02 times more volatile than Canadian Pacific Railway. It trades about -0.13 of its total potential returns per unit of risk. Canadian Pacific Railway is currently generating about -0.02 per unit of volatility. If you would invest  7,196  in Canadian Pacific Railway on December 30, 2024 and sell it today you would lose (254.00) from holding Canadian Pacific Railway or give up 3.53% of portfolio value over 90 days.

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

Greenbrier Companies  vs.  Canadian Pacific Railway

Greenbrier Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Greenbrier Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Canadian Pacific Railway

Risk-Adjusted Performance

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 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 Greenbrier Companies and Canadian Pacific

The main advantage of trading using opposite Greenbrier Companies and Canadian Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Greenbrier Companies 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 Greenbrier Companies 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.