Correlation Between Canadian National and MITIE GROUP

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Can any of the company-specific risk be diversified away by investing in both Canadian National and MITIE GROUP 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 MITIE GROUP 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 MITIE GROUP PLC, you can compare the effects of market volatilities on Canadian National and MITIE GROUP 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 MITIE GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian National and MITIE GROUP.

Diversification Opportunities for Canadian National and MITIE GROUP

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Canadian and MITIE is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Canadian National Railway and MITIE GROUP PLC ORD 2 5P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MITIE GROUP PLC 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 MITIE GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MITIE GROUP PLC has no effect on the direction of Canadian National i.e., Canadian National and MITIE GROUP go up and down completely randomly.

Pair Corralation between Canadian National and MITIE GROUP

Considering the 90-day investment horizon Canadian National Railway is expected to under-perform the MITIE GROUP. But the stock apears to be less risky and, when comparing its historical volatility, Canadian National Railway is 1.45 times less risky than MITIE GROUP. The stock trades about 0.0 of its potential returns per unit of risk. The MITIE GROUP PLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6,486  in MITIE GROUP PLC on June 27, 2022 and sell it today you would earn a total of  434.00  from holding MITIE GROUP PLC or generate 6.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.2%
ValuesDaily Returns

Canadian National Railway  vs.  MITIE GROUP PLC ORD 2 5P

 Performance (%) 
       Timeline  
Canadian National Railway 
Canadian Performance
0 of 100
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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Canadian Price Channel

MITIE GROUP PLC 
MITIE Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in MITIE GROUP PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish basic indicators, MITIE GROUP revealed solid returns over the last few months and may actually be approaching a breakup point.

MITIE Price Channel

Canadian National and MITIE GROUP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Canadian National and MITIE GROUP

The main advantage of trading using opposite Canadian National and MITIE GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian National position performs unexpectedly, MITIE GROUP 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 MITIE GROUP will offset losses from the drop in MITIE GROUP's long position.
Canadian National vs. BUSHVELD MINERALS LTD
The idea behind Canadian National Railway and MITIE GROUP PLC 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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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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