Correlation Between Canadian National and Schneider National

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

Diversification Opportunities for Canadian National and Schneider National

-0.48

Correlation Coefficient

Canadian National  Schneider National

Very good diversification

The 3 months correlation between Canadian and Schneider is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Canadian National Railway and Schneider National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schneider National 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 Schneider National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schneider National has no effect on the direction of Canadian National i.e., Canadian National and Schneider National go up and down completely randomly.

Pair Corralation between Canadian National and Schneider National

Considering the 90-day investment horizon Canadian National Railway is expected to under-perform the Schneider National. But the stock apears to be less risky and, when comparing its historical volatility, Canadian National Railway is 1.46 times less risky than Schneider National. The stock trades about -0.17 of its potential returns per unit of risk. The Schneider National is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,765  in Schneider National on September 24, 2024 and sell it today you would earn a total of  129.00  from holding Schneider National or generate 4.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Canadian National Railway  vs.  Schneider National

Canadian National Railway

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian National Railway has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Schneider National

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Schneider National are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Schneider National is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Canadian National and Schneider National

The main advantage of trading using opposite Canadian National and Schneider National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian National position performs unexpectedly, Schneider 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 Schneider National will offset losses from the drop in Schneider National's long position.

The idea behind Canadian National Railway and Schneider National 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.

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 the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.