Correlation Between CAE and Loar Holdings

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

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

Diversification Opportunities for CAE and Loar Holdings

0.63

Correlation Coefficient

CAE  Loar Holdings

Poor diversification

The 3 months correlation between CAE and Loar is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CAE Inc and Loar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loar Holdings 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 Loar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loar Holdings has no effect on the direction of CAE i.e., CAE and Loar Holdings go up and down completely randomly.

Pair Corralation between CAE and Loar Holdings

Considering the 90-day investment horizon CAE Inc is expected to generate 0.91 times more return on investment than Loar Holdings. However, CAE Inc is 1.1 times less risky than Loar Holdings. It trades about 0.34 of its potential returns per unit of risk. Loar Holdings is currently generating about 0.03 per unit of risk. If you would invest  1,878  in CAE Inc on August 31, 2024 and sell it today you would earn a total of  455.00  from holding CAE Inc or generate 24.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

CAE Inc  vs.  Loar Holdings

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.

Loar Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Loar Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Loar Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CAE and Loar Holdings

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

The idea behind CAE Inc and Loar 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.