Correlation Between CAE and Aerojet Rocketdyne

Can any of the company-specific risk be diversified away by investing in both CAE and Aerojet Rocketdyne 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 Aerojet Rocketdyne into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CAE Inc and Aerojet Rocketdyne Holdings, you can compare the effects of market volatilities on CAE and Aerojet Rocketdyne 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 Aerojet Rocketdyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAE and Aerojet Rocketdyne.

Diversification Opportunities for CAE and Aerojet Rocketdyne

0.05

Correlation Coefficient

CAE  Aerojet Rocketdyne

Significant diversification

The 3 months correlation between CAE and Aerojet is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding CAE Inc and Aerojet Rocketdyne Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerojet Rocketdyne 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 Aerojet Rocketdyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerojet Rocketdyne has no effect on the direction of CAE i.e., CAE and Aerojet Rocketdyne go up and down completely randomly.

Pair Corralation between CAE and Aerojet Rocketdyne

If you would invest  1,788  in CAE Inc on August 30, 2024 and sell it today you would earn a total of  545.00  from holding CAE Inc or generate 30.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

CAE Inc  vs.  Aerojet Rocketdyne Holdings

CAE Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CAE Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, CAE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aerojet Rocketdyne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aerojet Rocketdyne Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Aerojet Rocketdyne is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CAE and Aerojet Rocketdyne

The main advantage of trading using opposite CAE and Aerojet Rocketdyne positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAE position performs unexpectedly, Aerojet Rocketdyne 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 Aerojet Rocketdyne will offset losses from the drop in Aerojet Rocketdyne's long position.

The idea behind CAE Inc and Aerojet Rocketdyne Holdings 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.