Correlation Between Cardno and Great Lakes

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

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

Diversification Opportunities for Cardno and Great Lakes

-0.85

Correlation Coefficient

Cardno  Great Lakes

Pay attention - limited upside

The 3 months correlation between Cardno and Great is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Cardno Limited and Great Lakes Dredge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Lakes Dredge and Cardno 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 Cardno Limited are associated (or correlated) with Great Lakes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Lakes Dredge has no effect on the direction of Cardno i.e., Cardno and Great Lakes go up and down completely randomly.

Pair Corralation between Cardno and Great Lakes

Assuming the 90 days horizon Cardno Limited is expected to under-perform the Great Lakes. In addition to that, Cardno is 2.12 times more volatile than Great Lakes Dredge. It trades about -0.29 of its total potential returns per unit of risk. Great Lakes Dredge is currently generating about 0.23 per unit of volatility. If you would invest  946.00  in Great Lakes Dredge on September 2, 2024 and sell it today you would earn a total of  317.00  from holding Great Lakes Dredge or generate 33.51% return on investment over 90 days.

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

Cardno Limited  vs.  Great Lakes Dredge

Cardno Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cardno Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Great Lakes Dredge

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Great Lakes Dredge are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Great Lakes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cardno and Great Lakes

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

The idea behind Cardno Limited and Great Lakes Dredge 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.