Correlation Between Cargojet and Cineplex

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

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

Diversification Opportunities for Cargojet and Cineplex

-0.89

Correlation Coefficient

Cargojet  Cineplex

Pay attention - limited upside

The 3 months correlation between Cargojet and Cineplex is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Cargojet and Cineplex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cineplex and Cargojet 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 Cargojet are associated (or correlated) with Cineplex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cineplex has no effect on the direction of Cargojet i.e., Cargojet and Cineplex go up and down completely randomly.

Pair Corralation between Cargojet and Cineplex

Assuming the 90 days trading horizon Cargojet is expected to generate 1.7 times more return on investment than Cineplex. However, Cargojet is 1.7 times more volatile than Cineplex. It trades about 0.05 of its potential returns per unit of risk. Cineplex is currently generating about -0.36 per unit of risk. If you would invest  11,121  in Cargojet on October 13, 2024 and sell it today you would earn a total of  182.00  from holding Cargojet or generate 1.64% return on investment over 90 days.

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

Cargojet  vs.  Cineplex

Cargojet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cargojet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Cineplex

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cineplex are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cineplex displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cargojet and Cineplex

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

The idea behind Cargojet and Cineplex 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.