Correlation Between Cargojet and Dye Durham

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

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

Diversification Opportunities for Cargojet and Dye Durham

0.67

Correlation Coefficient

Cargojet  Dye Durham

Poor diversification

The 3 months correlation between Cargojet and Dye is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cargojet and Dye Durham in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dye Durham 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 Dye Durham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dye Durham has no effect on the direction of Cargojet i.e., Cargojet and Dye Durham go up and down completely randomly.

Pair Corralation between Cargojet and Dye Durham

Assuming the 90 days trading horizon Cargojet is expected to generate 0.58 times more return on investment than Dye Durham. However, Cargojet is 1.71 times less risky than Dye Durham. It trades about -0.13 of its potential returns per unit of risk. Dye Durham is currently generating about -0.13 per unit of risk. If you would invest  10,237  in Cargojet on December 29, 2024 and sell it today you would lose (1,975) from holding Cargojet or give up 19.29% of portfolio value over 90 days.

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

Cargojet  vs.  Dye Durham

Cargojet

Risk-Adjusted Performance

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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Dye Durham

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dye Durham 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 fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Cargojet and Dye Durham

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

The idea behind Cargojet and Dye Durham 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.