Correlation Between Canadian Pacific and Fastenal
Can any of the company-specific risk be diversified away by investing in both Canadian Pacific and Fastenal 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 Fastenal 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 Fastenal Company, you can compare the effects of market volatilities on Canadian Pacific and Fastenal 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 Fastenal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Pacific and Fastenal.
Diversification Opportunities for Canadian Pacific and Fastenal
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canadian and Fastenal is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Pacific Railway and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal 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 Fastenal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastenal has no effect on the direction of Canadian Pacific i.e., Canadian Pacific and Fastenal go up and down completely randomly.
Pair Corralation between Canadian Pacific and Fastenal
Allowing for the 90-day total investment horizon Canadian Pacific Railway is expected to under-perform the Fastenal. But the stock apears to be less risky and, when comparing its historical volatility, Canadian Pacific Railway is 1.5 times less risky than Fastenal. The stock trades about -0.08 of its potential returns per unit of risk. The Fastenal Company is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 4,158 in Fastenal Company on March 20, 2025 and sell it today you would lose (42.50) from holding Fastenal Company or give up 1.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Pacific Railway vs. Fastenal Company
Performance |
| Timeline |
| Canadian Pacific Railway |
| Fastenal |
Canadian Pacific and Fastenal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Pacific and Fastenal
The main advantage of trading using opposite Canadian Pacific and Fastenal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Pacific position performs unexpectedly, Fastenal 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 Fastenal will offset losses from the drop in Fastenal's long position.| Canadian Pacific vs. Union Pacific | Canadian Pacific vs. CSX Corporation | Canadian Pacific vs. Norfolk Southern | Canadian Pacific vs. Westinghouse Air Brake |
| Fastenal vs. Applied Industrial Technologies | Fastenal vs. MSC Industrial Direct | Fastenal vs. Ferguson Plc | Fastenal vs. Watsco Inc |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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