Correlation Between CAE and Open Text
Can any of the company-specific risk be diversified away by investing in both CAE and Open Text 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 Open Text into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CAE Inc and Open Text Corp, you can compare the effects of market volatilities on CAE and Open Text 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 Open Text. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAE and Open Text.
Diversification Opportunities for CAE and Open Text
Very good diversification
The 3 months correlation between CAE and Open is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding CAE Inc and Open Text Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Open Text Corp 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 Open Text. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Open Text Corp has no effect on the direction of CAE i.e., CAE and Open Text go up and down completely randomly.
Pair Corralation between CAE and Open Text
Assuming the 90 days trading horizon CAE Inc is expected to generate 0.99 times more return on investment than Open Text. However, CAE Inc is 1.01 times less risky than Open Text. It trades about 0.05 of its potential returns per unit of risk. Open Text Corp is currently generating about -0.04 per unit of risk. If you would invest 2,783 in CAE Inc on September 2, 2024 and sell it today you would earn a total of 508.00 from holding CAE Inc or generate 18.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CAE Inc vs. Open Text Corp
Performance |
| Timeline |
| CAE Inc |
| Open Text Corp |
CAE and Open Text Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAE and Open Text
The main advantage of trading using opposite CAE and Open Text positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAE position performs unexpectedly, Open Text 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 Open Text will offset losses from the drop in Open Text's long position.The idea behind CAE Inc and Open Text Corp 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.| Open Text vs. Canadian Utilities Limited | Open Text vs. Constellation Software | Open Text vs. Verizon Communications CDR | Open Text vs. TGS Esports |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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