Correlation Between AAR Corp and CAE

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Can any of the company-specific risk be diversified away by investing in both AAR Corp 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 AAR Corp and CAE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAR Corp and CAE Inc, you can compare the effects of market volatilities on AAR Corp 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 AAR Corp with a short position of CAE. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAR Corp and CAE.

Diversification Opportunities for AAR Corp and CAE

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between AAR Corp and CAE is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding AAR Corp and CAE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAE Inc and AAR Corp 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 AAR Corp 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 AAR Corp i.e., AAR Corp and CAE go up and down completely randomly.

Pair Corralation between AAR Corp and CAE

Considering the 90-day investment horizon AAR Corp is expected to generate 0.99 times more return on investment than CAE. However, AAR Corp is 1.01 times less risky than CAE. It trades about 0.08 of its potential returns per unit of risk. CAE Inc is currently generating about 0.05 per unit of risk. If you would invest  1,783  in AAR Corp on March 31, 2022 and sell it today you would earn a total of  2,369  from holding AAR Corp or generate 132.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

AAR Corp  vs.  CAE Inc

 Performance (%) 
      Timeline 
AAR Corp 
AAR Corp Performance
0 of 100
Over the last 90 days AAR Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in July 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

AAR Corp Price Channel

CAE Inc 
CAE Performance
0 of 100
Over the last 90 days CAE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CAE is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0277
Last Split Factor
2:1
Forward Annual Dividend Rate
0.31
Dividend Date
2020-03-31
Ex Dividend Date
2020-03-12
Last Split Date
2001-07-05

CAE Price Channel

AAR Corp and CAE Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with AAR Corp and CAE

The main advantage of trading using opposite AAR Corp and CAE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAR Corp 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 AAR Corp 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 Shere Portfolio module to track or share privately all of your investments from the convenience of any device.

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