Correlation Between Werner Enterprises and Canadian Pacific

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

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

Diversification Opportunities for Werner Enterprises and Canadian Pacific

0.27

Correlation Coefficient

Werner Enterprises  Canadian Pacific

Modest diversification

The 3 months correlation between Werner and Canadian is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Werner Enterprises 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 Werner Enterprises 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 Werner Enterprises 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 Werner Enterprises i.e., Werner Enterprises and Canadian Pacific go up and down completely randomly.

Pair Corralation between Werner Enterprises and Canadian Pacific

Given the investment horizon of 90 days Werner Enterprises is expected to under-perform the Canadian Pacific. But the stock apears to be less risky and, when comparing its historical volatility, Werner Enterprises is 1.13 times less risky than Canadian Pacific. The stock trades about -0.18 of its potential returns per unit of risk. The Canadian Pacific Railway is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  7,196  in Canadian Pacific Railway on December 28, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Werner Enterprises  vs.  Canadian Pacific Railway

Werner Enterprises

Risk-Adjusted Performance

Very Weak

Over the last 90 days Werner Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Canadian Pacific Railway

Risk-Adjusted Performance

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 Werner Enterprises and Canadian Pacific

The main advantage of trading using opposite Werner Enterprises and Canadian Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Werner Enterprises 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 Werner Enterprises 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.