Correlation Between Canadian Pacific and ATAI Life

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Can any of the company-specific risk be diversified away by investing in both Canadian Pacific and ATAI Life 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 Pacific and ATAI Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Pacific Railway and ATAI Life Sciences, you can compare the effects of market volatilities on Canadian Pacific and ATAI Life 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 Pacific with a short position of ATAI Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Pacific and ATAI Life.

Diversification Opportunities for Canadian Pacific and ATAI Life

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between Canadian and ATAI Life is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and ATAI Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATAI Life Sciences and Canadian Pacific 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 Pacific Railway are associated (or correlated) with ATAI Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATAI Life Sciences has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and ATAI Life go up and down completely randomly.

Pair Corralation between Canadian Pacific and ATAI Life

Allowing for the 90-day total investment horizon Canadian Pacific is expected to generate 1.82 times less return on investment than ATAI Life. But when comparing it to its historical volatility, Canadian Pacific Railway is 3.48 times less risky than ATAI Life. It trades about 0.34 of its potential returns per unit of risk. ATAI Life Sciences is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  298.00  in ATAI Life Sciences on September 4, 2022 and sell it today you would earn a total of  57.00  from holding ATAI Life Sciences or generate 19.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Canadian Pacific Railway  vs.  ATAI Life Sciences

 Performance (%) 
       Timeline  
Canadian Pacific Railway 
Canadian Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Pacific Railway are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Canadian Pacific displayed solid returns over the last few months and may actually be approaching a breakup point.

Canadian Price Channel

ATAI Life Sciences 
ATAI Life Performance
0 of 100
Over the last 90 days ATAI Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ATAI Life Price Channel

Canadian Pacific and ATAI Life Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Canadian Pacific and ATAI Life

The main advantage of trading using opposite Canadian Pacific and ATAI Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Pacific position performs unexpectedly, ATAI Life 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 ATAI Life will offset losses from the drop in ATAI Life's long position.
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The idea behind Canadian Pacific Railway and ATAI Life Sciences 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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