Correlation Between CGI and CAE

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

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

Diversification Opportunities for CGI and CAE

-0.19

Correlation Coefficient

CGI  CAE

Good diversification

The 3 months correlation between CGI and CAE is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding CGI Inc and CAE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAE Inc and CGI 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 CGI Inc 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 CGI i.e., CGI and CAE go up and down completely randomly.

Pair Corralation between CGI and CAE

Assuming the 90 days trading horizon CGI Inc is expected to under-perform the CAE. But the stock apears to be less risky and, when comparing its historical volatility, CGI Inc is 1.58 times less risky than CAE. The stock trades about -0.11 of its potential returns per unit of risk. The CAE Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,639  in CAE Inc on December 29, 2024 and sell it today you would lose (133.00) from holding CAE Inc or give up 3.65% of portfolio value over 90 days.

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

CGI Inc  vs.  CAE Inc

CGI Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days CGI Inc 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 CGI and CAE

The main advantage of trading using opposite CGI and CAE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CGI 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 CGI Inc 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.