Correlation Between Elbit Systems and CAE

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

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

Diversification Opportunities for Elbit Systems and CAE

-0.31

Correlation Coefficient

Elbit Systems  CAE

Very good diversification

The 3 months correlation between Elbit and CAE is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Systems and CAE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAE Inc and Elbit Systems 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 Elbit Systems are associated (or correlated) with CAE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAE Inc has no effect on the direction of Elbit Systems i.e., Elbit Systems and CAE go up and down completely randomly.

Pair Corralation between Elbit Systems and CAE

Given the investment horizon of 90 days Elbit Systems is expected to under-perform the CAE. In addition to that, Elbit Systems is 1.31 times more volatile than CAE Inc. It trades about -0.05 of its total potential returns per unit of risk. CAE Inc is currently generating about -0.05 per unit of volatility. If you would invest  1,913  in CAE Inc on January 24, 2024 and sell it today you would lose (59.00) from holding CAE Inc or give up 3.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Elbit Systems  vs.  CAE Inc

Elbit Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elbit Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Elbit Systems is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 weak 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.

Pair Trading with Elbit Systems and CAE

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

The idea behind Elbit Systems and CAE Inc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.