Correlation Between CAE and Baylin Technologies

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

By analyzing existing cross correlation between CAE Inc and Baylin Technologies, you can compare the effects of market volatilities on CAE and Baylin Technologies 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 CAE with a short position of Baylin Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAE and Baylin Technologies.

Diversification Opportunities for CAE and Baylin Technologies

-0.21

Correlation Coefficient

CAE  Baylin Technologies

Very good diversification

The 3 months correlation between CAE and Baylin is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding CAE Inc and Baylin Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baylin Technologies and CAE 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 CAE Inc are associated (or correlated) with Baylin Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baylin Technologies has no effect on the direction of CAE i.e., CAE and Baylin Technologies go up and down completely randomly.

Pair Corralation between CAE and Baylin Technologies

Assuming the 90 days trading horizon CAE Inc is expected to generate 0.3 times more return on investment than Baylin Technologies. However, CAE Inc is 3.31 times less risky than Baylin Technologies. It trades about 0.26 of its potential returns per unit of risk. Baylin Technologies is currently generating about 0.07 per unit of risk. If you would invest  2,395  in CAE Inc on September 16, 2024 and sell it today you would earn a total of  923.00  from holding CAE Inc or generate 38.54% return on investment over 90 days.

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

CAE Inc  vs.  Baylin Technologies

CAE Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CAE Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, CAE displayed solid returns over the last few months and may actually be approaching a breakup point.

Baylin Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Baylin Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Baylin Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CAE and Baylin Technologies

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

The idea behind CAE Inc and Baylin Technologies 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.