Correlation Between Finning International and CAE

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

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

Diversification Opportunities for Finning International and CAE

0.3

Correlation Coefficient

Finning International  CAE

Weak diversification

The 3 months correlation between Finning and CAE is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Finning International and CAE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAE Inc and Finning International 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 Finning International are associated (or correlated) with CAE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAE Inc has no effect on the direction of Finning International i.e., Finning International and CAE go up and down completely randomly.

Pair Corralation between Finning International and CAE

Assuming the 90 days trading horizon Finning International is expected to generate 1.01 times more return on investment than CAE. However, Finning International is 1.01 times more volatile than CAE Inc. It trades about 0.07 of its potential returns per unit of risk. CAE Inc is currently generating about -0.01 per unit of risk. If you would invest  3,693  in Finning International on December 29, 2024 and sell it today you would earn a total of  321.00  from holding Finning International or generate 8.69% return on investment over 90 days.

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

Finning International  vs.  CAE Inc

Finning International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Finning International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Finning International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CAE Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, CAE is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Finning International and CAE

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

The idea behind Finning International and CAE Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.