Correlation Between Seek and Canadian National

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

Diversification Opportunities for Seek and Canadian National

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Seek and Canadian is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Seek and Canadian National Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian National Railway and Seek 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 Seek are associated (or correlated) with Canadian National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian National Railway has no effect on the direction of Seek i.e., Seek and Canadian National go up and down completely randomly.

Pair Corralation between Seek and Canadian National

Assuming the 90 days horizon Seek is expected to generate 1.58 times more return on investment than Canadian National. However, Seek is 1.58 times more volatile than Canadian National Railway. It trades about 0.14 of its potential returns per unit of risk. Canadian National Railway is currently generating about 0.19 per unit of risk. If you would invest  2,515  in Seek on August 30, 2022 and sell it today you would earn a total of  426.00  from holding Seek or generate 16.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy97.67%
ValuesDaily Returns

Seek  vs.  Canadian National Railway

 Performance (%) 
       Timeline  
Seek 
Seek Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Seek are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Seek may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Seek Price Channel

Canadian National Railway 
Canadian Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Canadian National Railway are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Canadian National may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Canadian Price Channel

Seek and Canadian National Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Seek and Canadian National

The main advantage of trading using opposite Seek and Canadian National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seek position performs unexpectedly, Canadian National 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 National will offset losses from the drop in Canadian National's long position.
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The idea behind Seek and Canadian National 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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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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