Correlation Between CAE and Elbit Systems

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

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

Diversification Opportunities for CAE and Elbit Systems

0.15

Correlation Coefficient

CAE  Elbit Systems

Average diversification

The 3 months correlation between CAE and Elbit is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding CAE Inc and Elbit Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Systems 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 Elbit Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elbit Systems has no effect on the direction of CAE i.e., CAE and Elbit Systems go up and down completely randomly.

Pair Corralation between CAE and Elbit Systems

Considering the 90-day investment horizon CAE is expected to generate 12.0 times less return on investment than Elbit Systems. In addition to that, CAE is 1.15 times more volatile than Elbit Systems. It trades about 0.03 of its total potential returns per unit of risk. Elbit Systems is currently generating about 0.36 per unit of volatility. If you would invest  25,846  in Elbit Systems on December 26, 2024 and sell it today you would earn a total of  14,655  from holding Elbit Systems or generate 56.7% 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.  Elbit Systems

CAE Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CAE Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CAE is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Elbit Systems

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Systems are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Elbit Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CAE and Elbit Systems

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

The idea behind CAE Inc and Elbit Systems 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.