Correlation Between Martinrea International and CAE

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

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

Diversification Opportunities for Martinrea International and CAE

-0.09

Correlation Coefficient

Martinrea International  CAE

Good diversification

The 3 months correlation between Martinrea and CAE is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Martinrea International and CAE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAE Inc and Martinrea 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 Martinrea 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 Martinrea International i.e., Martinrea International and CAE go up and down completely randomly.

Pair Corralation between Martinrea International and CAE

Assuming the 90 days trading horizon Martinrea International is expected to under-perform the CAE. But the stock apears to be less risky and, when comparing its historical volatility, Martinrea International is 1.45 times less risky than CAE. The stock trades about -0.19 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

Martinrea International  vs.  CAE Inc

Martinrea International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Martinrea International 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 technical and 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.

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 Martinrea International and CAE

The main advantage of trading using opposite Martinrea International and CAE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Martinrea 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 Martinrea 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.