Correlation Between USD Partners and Canadian Pacific

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

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

Diversification Opportunities for USD Partners and Canadian Pacific

0.0

Correlation Coefficient

USD Partners  Canadian Pacific

Pay attention - limited upside

The 3 months correlation between USD and Canadian is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding USD Partners LP 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 USD Partners 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 USD Partners LP 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 USD Partners i.e., USD Partners and Canadian Pacific go up and down completely randomly.

Pair Corralation between USD Partners and Canadian Pacific

If you would invest  7,288  in Canadian Pacific Railway on December 18, 2024 and sell it today you would earn a total of  143.00  from holding Canadian Pacific Railway or generate 1.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

USD Partners LP  vs.  Canadian Pacific Railway

USD Partners LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days USD Partners LP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, USD Partners is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Canadian Pacific Railway

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Pacific Railway are ranked lower than 2 (%) 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 USD Partners and Canadian Pacific

The main advantage of trading using opposite USD Partners and Canadian Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USD Partners 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 USD Partners LP 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..