Correlation Between CAE and Airbus Group

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

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

Diversification Opportunities for CAE and Airbus Group

0.33

Correlation Coefficient

CAE  Airbus Group

Weak diversification

The 3 months correlation between CAE and Airbus is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding CAE Inc and Airbus Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group SE 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 Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group SE has no effect on the direction of CAE i.e., CAE and Airbus Group go up and down completely randomly.

Pair Corralation between CAE and Airbus Group

Considering the 90-day investment horizon CAE Inc is expected to under-perform the Airbus Group. In addition to that, CAE is 1.04 times more volatile than Airbus Group SE. It trades about -0.01 of its total potential returns per unit of risk. Airbus Group SE is currently generating about 0.06 per unit of volatility. If you would invest  9,386  in Airbus Group SE on March 13, 2024 and sell it today you would earn a total of  6,631  from holding Airbus Group SE or generate 70.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

CAE Inc  vs.  Airbus Group SE

CAE Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Airbus Group SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Airbus Group SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Airbus Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CAE and Airbus Group

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

The idea behind CAE Inc and Airbus Group SE 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.