Correlation Between CAE and Linamar

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

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

Diversification Opportunities for CAE and Linamar

-0.08

Correlation Coefficient

CAE  Linamar

Good diversification

The 3 months correlation between CAE and Linamar is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding CAE Inc and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar 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 Linamar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linamar has no effect on the direction of CAE i.e., CAE and Linamar go up and down completely randomly.

Pair Corralation between CAE and Linamar

Assuming the 90 days trading horizon CAE Inc is expected to generate 1.27 times more return on investment than Linamar. However, CAE is 1.27 times more volatile than Linamar. It trades about 0.01 of its potential returns per unit of risk. Linamar is currently generating about -0.07 per unit of risk. If you would invest  3,639  in CAE Inc on December 28, 2024 and sell it today you would lose (15.00) from holding CAE Inc or give up 0.41% of portfolio value over 90 days.

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

CAE Inc  vs.  Linamar

CAE Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, CAE is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Linamar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Linamar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with CAE and Linamar

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

The idea behind CAE Inc and Linamar 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 Commodity Directory module to find actively traded commodities issued by global exchanges.