Correlation Between Ingersoll Rand and Canadian Pacific

Can any of the company-specific risk be diversified away by investing in both Ingersoll Rand and Canadian Pacific 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 Ingersoll Rand and Canadian Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ingersoll Rand and Canadian Pacific Railway, you can compare the effects of market volatilities on Ingersoll Rand and Canadian Pacific 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 Ingersoll Rand with a short position of Canadian Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ingersoll Rand and Canadian Pacific.

Diversification Opportunities for Ingersoll Rand and Canadian Pacific

-0.63

Correlation Coefficient

Ingersoll Rand  Canadian Pacific

Excellent diversification

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

Pair Corralation between Ingersoll Rand and Canadian Pacific

Allowing for the 90-day total investment horizon Ingersoll Rand is expected to generate 1.24 times more return on investment than Canadian Pacific. However, Ingersoll Rand is 1.24 times more volatile than Canadian Pacific Railway. It trades about 0.18 of its potential returns per unit of risk. Canadian Pacific Railway is currently generating about -0.1 per unit of risk. If you would invest  8,831  in Ingersoll Rand on September 2, 2024 and sell it today you would earn a total of  1,586  from holding Ingersoll Rand or generate 17.96% return on investment over 90 days.

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

Ingersoll Rand  vs.  Canadian Pacific Railway

Ingersoll Rand

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ingersoll Rand are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Ingersoll Rand reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Ingersoll Rand and Canadian Pacific

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

The idea behind Ingersoll Rand and Canadian Pacific 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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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.