Correlation Between Kaman and CAE

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

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

Diversification Opportunities for Kaman and CAE

-0.31

Correlation Coefficient

Kaman  CAE

Very good diversification

The 3 months correlation between Kaman and CAE is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Kaman and CAE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAE Inc and Kaman 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 Kaman 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 Kaman i.e., Kaman and CAE go up and down completely randomly.

Pair Corralation between Kaman and CAE

Given the investment horizon of 90 days Kaman is expected to generate 4.11 times more return on investment than CAE. However, Kaman is 4.11 times more volatile than CAE Inc. It trades about 0.07 of its potential returns per unit of risk. CAE Inc is currently generating about -0.03 per unit of risk. If you would invest  2,361  in Kaman on January 24, 2024 and sell it today you would earn a total of  2,238  from holding Kaman or generate 94.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.51%
Values	Daily Returns

Kaman  vs.  CAE Inc

Kaman

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kaman are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Kaman is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the 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 Kaman and CAE

The main advantage of trading using opposite Kaman and CAE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaman 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 Kaman 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.