Correlation Between Smith AO and CAE

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

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

Diversification Opportunities for Smith AO and CAE

-0.17

Correlation Coefficient

Smith AO  CAE

Good diversification

The 3 months correlation between Smith and CAE is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Smith AO and CAE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAE Inc and Smith AO 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 Smith AO 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 Smith AO i.e., Smith AO and CAE go up and down completely randomly.

Pair Corralation between Smith AO and CAE

Considering the 90-day investment horizon Smith AO is expected to under-perform the CAE. But the stock apears to be less risky and, when comparing its historical volatility, Smith AO is 1.18 times less risky than CAE. The stock trades about -0.02 of its potential returns per unit of risk. The CAE Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,843  in CAE Inc on July 26, 2025 and sell it today you would earn a total of  19.00  from holding CAE Inc or generate 0.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Smith AO  vs.  CAE Inc

Smith AO

Risk-Adjusted Performance

Weakest

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

CAE Inc

Risk-Adjusted Performance

Weakest

Compared to the overall equity markets, risk-adjusted returns on investments in CAE Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Smith AO and CAE

The main advantage of trading using opposite Smith AO and CAE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smith AO 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 Smith AO 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.