Correlation Between CAE and Boeing

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

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

Diversification Opportunities for CAE and Boeing

-0.41

Correlation Coefficient

CAE  Boeing

Very good diversification

The 3 months correlation between CAE and Boeing is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding CAE Inc and Boeing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of CAE i.e., CAE and Boeing go up and down completely randomly.

Pair Corralation between CAE and Boeing

Considering the 90-day investment horizon CAE Inc is expected to generate 1.47 times more return on investment than Boeing. However, CAE is 1.47 times more volatile than Boeing Co. It trades about 0.21 of its potential returns per unit of risk. Boeing Co is currently generating about 0.24 per unit of risk. If you would invest  1,798  in CAE Inc on September 23, 2024 and sell it today you would earn a total of  579.00  from holding CAE Inc or generate 32.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	60.0%
Values	Daily Returns

CAE Inc  vs.  Boeing Co

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 abnormal basic indicators, CAE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Boeing

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Boeing Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CAE and Boeing

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

The idea behind CAE Inc and Boeing Co 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.