Correlation Between Hexcel and Cadre Holdings

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

By analyzing existing cross correlation between Hexcel and Cadre Holdings, you can compare the effects of market volatilities on Hexcel and Cadre 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 Hexcel with a short position of Cadre Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hexcel and Cadre Holdings.

Diversification Opportunities for Hexcel and Cadre Holdings

0.18

Correlation Coefficient

Hexcel  Cadre Holdings

Average diversification

The 3 months correlation between Hexcel and Cadre is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Hexcel and Cadre Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadre Holdings and Hexcel 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 Hexcel are associated (or correlated) with Cadre Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadre Holdings has no effect on the direction of Hexcel i.e., Hexcel and Cadre Holdings go up and down completely randomly.

Pair Corralation between Hexcel and Cadre Holdings

Considering the 90-day investment horizon Hexcel is expected to generate 0.65 times more return on investment than Cadre Holdings. However, Hexcel is 1.53 times less risky than Cadre Holdings. It trades about 0.06 of its potential returns per unit of risk. Cadre Holdings is currently generating about -0.02 per unit of risk. If you would invest  6,032  in Hexcel on September 2, 2024 and sell it today you would earn a total of  307.00  from holding Hexcel or generate 5.09% return on investment over 90 days.

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

Hexcel  vs.  Cadre Holdings

Hexcel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hexcel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Hexcel is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Cadre Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hexcel and Cadre Holdings

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

The idea behind Hexcel and Cadre 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.