Correlation Between Dream Unlimited and Cargojet

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

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

Diversification Opportunities for Dream Unlimited and Cargojet

0.24

Correlation Coefficient

Dream Unlimited  Cargojet

Modest diversification

The 3 months correlation between Dream and Cargojet is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dream Unlimited Corp and Cargojet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cargojet and Dream Unlimited 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 Dream Unlimited Corp are associated (or correlated) with Cargojet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cargojet has no effect on the direction of Dream Unlimited i.e., Dream Unlimited and Cargojet go up and down completely randomly.

Pair Corralation between Dream Unlimited and Cargojet

Assuming the 90 days trading horizon Dream Unlimited Corp is expected to under-perform the Cargojet. But the stock apears to be less risky and, when comparing its historical volatility, Dream Unlimited Corp is 1.11 times less risky than Cargojet. The stock trades about -0.06 of its potential returns per unit of risk. The Cargojet is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  14,197  in Cargojet on February 13, 2024 and sell it today you would lose (2,188) from holding Cargojet or give up 15.41% of portfolio value over 90 days.

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

Dream Unlimited Corp  vs.  Cargojet

Dream Unlimited Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dream Unlimited Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Cargojet

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cargojet are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cargojet is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dream Unlimited and Cargojet

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

The idea behind Dream Unlimited Corp and Cargojet 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.