Correlation Between Metro and CAE

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

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

Diversification Opportunities for Metro and CAE

0.34

Correlation Coefficient

Metro  CAE

Weak diversification

The 3 months correlation between Metro and CAE is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Metro Inc and CAE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAE Inc and Metro 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 Metro 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 Metro i.e., Metro and CAE go up and down completely randomly.

Pair Corralation between Metro and CAE

Assuming the 90 days trading horizon Metro Inc is expected to generate 0.46 times more return on investment than CAE. However, Metro Inc is 2.17 times less risky than CAE. It trades about 0.13 of its potential returns per unit of risk. CAE Inc is currently generating about -0.01 per unit of risk. If you would invest  8,994  in Metro Inc on December 29, 2024 and sell it today you would earn a total of  781.00  from holding Metro Inc or generate 8.68% return on investment over 90 days.

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

Metro Inc  vs.  CAE Inc

Metro Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Metro 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 Metro and CAE

The main advantage of trading using opposite Metro and CAE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro 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 Metro 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.