Correlation Between CAE and CGI

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

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

Diversification Opportunities for CAE and CGI

0.16

Correlation Coefficient

CAE  CGI

Average diversification

The 3 months correlation between CAE and CGI is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding CAE Inc and CGI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGI Inc 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 CGI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGI Inc has no effect on the direction of CAE i.e., CAE and CGI go up and down completely randomly.

Pair Corralation between CAE and CGI

Assuming the 90 days trading horizon CAE Inc is expected to generate 2.06 times more return on investment than CGI. However, CAE is 2.06 times more volatile than CGI Inc. It trades about 0.25 of its potential returns per unit of risk. CGI Inc is currently generating about 0.07 per unit of risk. If you would invest  2,395  in CAE Inc on September 1, 2024 and sell it today you would earn a total of  896.00  from holding CAE Inc or generate 37.41% return on investment over 90 days.

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

CAE Inc  vs.  CGI Inc

CAE Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CAE Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, CAE displayed solid returns over the last few months and may actually be approaching a breakup point.

CGI Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CGI Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CGI is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CAE and CGI

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

The idea behind CAE Inc and CGI Inc 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.