Correlation Between Cargojet and Kinaxis

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

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

Diversification Opportunities for Cargojet and Kinaxis

-0.27

Correlation Coefficient

Cargojet  Kinaxis

Very good diversification

The 3 months correlation between Cargojet and Kinaxis is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Cargojet and Kinaxis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinaxis 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 Kinaxis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinaxis has no effect on the direction of Cargojet i.e., Cargojet and Kinaxis go up and down completely randomly.

Pair Corralation between Cargojet and Kinaxis

Assuming the 90 days trading horizon Cargojet is expected to generate 2.49 times less return on investment than Kinaxis. But when comparing it to its historical volatility, Cargojet is 1.21 times less risky than Kinaxis. It trades about 0.02 of its potential returns per unit of risk. Kinaxis is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  15,238  in Kinaxis on September 4, 2024 and sell it today you would earn a total of  3,028  from holding Kinaxis or generate 19.87% return on investment over 90 days.

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

Cargojet  vs.  Kinaxis

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 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.

Kinaxis

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kinaxis are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Kinaxis displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cargojet and Kinaxis

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

The idea behind Cargojet and Kinaxis 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.