Correlation Between Canadian Pacific and Founder Group

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

Diversification Opportunities for Canadian Pacific and Founder Group

-0.19

Correlation Coefficient

Canadian Pacific  Founder Group

Good diversification

The 3 months correlation between Canadian and Founder is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and Founder Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Founder Group Limited 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 Founder Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Founder Group Limited has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and Founder Group go up and down completely randomly.

Pair Corralation between Canadian Pacific and Founder Group

Allowing for the 90-day total investment horizon Canadian Pacific Railway is expected to generate 0.07 times more return on investment than Founder Group. However, Canadian Pacific Railway is 13.41 times less risky than Founder Group. It trades about -0.11 of its potential returns per unit of risk. Founder Group Limited is currently generating about -0.05 per unit of risk. If you would invest  7,702  in Canadian Pacific Railway on October 1, 2024 and sell it today you would lose (446.00) from holding Canadian Pacific Railway or give up 5.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Canadian Pacific Railway  vs.  Founder Group Limited

Canadian Pacific Railway

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Pacific Railway has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Founder Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Founder Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Canadian Pacific and Founder Group

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

The idea behind Canadian Pacific Railway and Founder Group Limited 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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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.