Correlation Between S A P and CAE
Can any of the company-specific risk be diversified away by investing in both S A P 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 S A P and CAE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Saputo Inc and CAE Inc, you can compare the effects of market volatilities on S A P 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 S A P with a short position of CAE. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and CAE.
Diversification Opportunities for S A P and CAE
Pay attention - limited upside
The 3 months correlation between SAP and CAE is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Saputo Inc and CAE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAE Inc and S A P 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 Saputo 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 S A P i.e., S A P and CAE go up and down completely randomly.
Pair Corralation between S A P and CAE
Assuming the 90 days trading horizon Saputo Inc is expected to under-perform the CAE. But the stock apears to be less risky and, when comparing its historical volatility, Saputo Inc is 1.27 times less risky than CAE. The stock trades about -0.03 of its potential returns per unit of risk. The CAE Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,703 in CAE Inc on August 31, 2024 and sell it today you would earn a total of 588.00 from holding CAE Inc or generate 21.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Saputo Inc vs. CAE Inc
Performance |
| Timeline |
| Saputo Inc |
| CAE Inc |
S A P and CAE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and CAE
The main advantage of trading using opposite S A P and CAE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P 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.| S A P vs. Metro Inc | S A P vs. George Weston Limited | S A P vs. Gildan Activewear | S A P vs. Loblaw Companies Limited |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |