Correlation Between CAE and Magellan Aerospace
Can any of the company-specific risk be diversified away by investing in both CAE and Magellan Aerospace 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 CAE and Magellan Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CAE Inc and Magellan Aerospace, you can compare the effects of market volatilities on CAE and Magellan Aerospace 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 CAE with a short position of Magellan Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAE and Magellan Aerospace.
Diversification Opportunities for CAE and Magellan Aerospace
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CAE and Magellan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding CAE Inc and Magellan Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magellan Aerospace and CAE 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 CAE Inc are associated (or correlated) with Magellan Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magellan Aerospace has no effect on the direction of CAE i.e., CAE and Magellan Aerospace go up and down completely randomly.
Pair Corralation between CAE and Magellan Aerospace
Assuming the 90 days trading horizon CAE Inc is expected to generate 1.85 times more return on investment than Magellan Aerospace. However, CAE is 1.85 times more volatile than Magellan Aerospace. It trades about 0.35 of its potential returns per unit of risk. Magellan Aerospace is currently generating about 0.07 per unit of risk. If you would invest 2,601 in CAE Inc on August 28, 2024 and sell it today you would earn a total of 656.00 from holding CAE Inc or generate 25.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CAE Inc vs. Magellan Aerospace
Performance |
| Timeline |
| CAE Inc |
| Magellan Aerospace |
CAE and Magellan Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAE and Magellan Aerospace
The main advantage of trading using opposite CAE and Magellan Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAE position performs unexpectedly, Magellan Aerospace 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 Magellan Aerospace will offset losses from the drop in Magellan Aerospace's long position.The idea behind CAE Inc and Magellan Aerospace 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.| Magellan Aerospace vs. Hammond Power Solutions | Magellan Aerospace vs. Questor Technology | Magellan Aerospace vs. Vecima Networks | Magellan Aerospace vs. Heroux Devtek |
Check out your portfolio center.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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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