Correlation Between Canadian Pacific and BTX Old

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

Diversification Opportunities for Canadian Pacific and BTX Old

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Canadian and BTX Old is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and BTX Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTX Old 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 BTX Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTX Old has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and BTX Old go up and down completely randomly.

Pair Corralation between Canadian Pacific and BTX Old

Allowing for the 90-day total investment horizon Canadian Pacific is expected to generate 2.43 times less return on investment than BTX Old. But when comparing it to its historical volatility, Canadian Pacific Railway is 3.96 times less risky than BTX Old. It trades about 0.08 of its potential returns per unit of risk. BTX Old is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  324.00  in BTX Old on September 8, 2022 and sell it today you would earn a total of  6.00  from holding BTX Old or generate 1.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy68.18%
ValuesDaily Returns

Canadian Pacific Railway  vs.  BTX Old

 Performance (%) 
       Timeline  
Canadian Pacific Railway 
Canadian Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Pacific Railway are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Canadian Pacific is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the insiders.

Canadian Price Channel

BTX Old 
BTX Old Performance
0 of 100
Over the last 90 days BTX Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, BTX Old showed solid returns over the last few months and may actually be approaching a breakup point.

Canadian Pacific and BTX Old Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Canadian Pacific and BTX Old

The main advantage of trading using opposite Canadian Pacific and BTX Old positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Pacific position performs unexpectedly, BTX Old 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 BTX Old will offset losses from the drop in BTX Old's long position.
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The idea behind Canadian Pacific Railway and BTX Old 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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