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
Very poor diversification
The 3 months correlation between Metro and CAE is 0.81. 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 1.04 times more return on investment than CAE. However, Metro is 1.04 times more volatile than CAE Inc. It trades about 0.03 of its potential returns per unit of risk. CAE Inc is currently generating about -0.08 per unit of risk. If you would invest 9,017 in Metro Inc on November 3, 2024 and sell it today you would earn a total of 64.00 from holding Metro Inc or generate 0.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metro Inc vs. CAE Inc
Performance |
| Timeline |
| Metro Inc |
| CAE Inc |
Metro and CAE Volatility Contrast
Predicted Return Density |
| Returns |
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.| Metro vs. Loblaw Companies Limited | Metro vs. Saputo Inc | Metro vs. Empire Company Limited | Metro vs. Dollarama |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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