Correlation Between CAE and Textron
Can any of the company-specific risk be diversified away by investing in both CAE and Textron 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 Textron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CAE Inc and Textron, you can compare the effects of market volatilities on CAE and Textron 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 Textron. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAE and Textron.
Diversification Opportunities for CAE and Textron
Very good diversification
The 3 months correlation between CAE and Textron is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding CAE Inc and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron 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 Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of CAE i.e., CAE and Textron go up and down completely randomly.
Pair Corralation between CAE and Textron
Considering the 90-day investment horizon CAE Inc is expected to generate 1.32 times more return on investment than Textron. However, CAE is 1.32 times more volatile than Textron. It trades about 0.38 of its potential returns per unit of risk. Textron is currently generating about -0.06 per unit of risk. If you would invest 1,834 in CAE Inc on August 24, 2024 and sell it today you would earn a total of 497.00 from holding CAE Inc or generate 27.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CAE Inc vs. Textron
Performance |
| Timeline |
| CAE Inc |
| Textron |
CAE and Textron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAE and Textron
The main advantage of trading using opposite CAE and Textron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAE position performs unexpectedly, Textron 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 Textron will offset losses from the drop in Textron's long position.The idea behind CAE Inc and Textron 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.| Textron vs. Hexcel | Textron vs. Huntington Ingalls Industries | Textron vs. Curtiss Wright | Textron vs. Mercury Systems |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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