Correlation Between CAE and Huntington Ingalls

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

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

Diversification Opportunities for CAE and Huntington Ingalls

-0.7

Correlation Coefficient

CAE  Huntington Ingalls

Excellent diversification

The 3 months correlation between CAE and Huntington is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding CAE Inc and Huntington Ingalls Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntington Ingalls 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 Huntington Ingalls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntington Ingalls has no effect on the direction of CAE i.e., CAE and Huntington Ingalls go up and down completely randomly.

Pair Corralation between CAE and Huntington Ingalls

Considering the 90-day investment horizon CAE Inc is expected to generate 0.58 times more return on investment than Huntington Ingalls. However, CAE Inc is 1.71 times less risky than Huntington Ingalls. It trades about 0.22 of its potential returns per unit of risk. Huntington Ingalls Industries is currently generating about -0.12 per unit of risk. If you would invest  1,768  in CAE Inc on August 31, 2024 and sell it today you would earn a total of  565.00  from holding CAE Inc or generate 31.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

CAE Inc  vs.  Huntington Ingalls Industries

CAE Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CAE Inc are ranked lower than 17 (%) 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.

Huntington Ingalls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntington Ingalls Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with CAE and Huntington Ingalls

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

The idea behind CAE Inc and Huntington Ingalls Industries 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.