Correlation Between CECO Environmental and Bridgford Foods

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

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

Diversification Opportunities for CECO Environmental and Bridgford Foods

0.13

Correlation Coefficient

CECO Environmental  Bridgford Foods

Average diversification

The 3 months correlation between CECO and Bridgford is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Bridgford Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgford Foods and CECO Environmental 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 CECO Environmental Corp are associated (or correlated) with Bridgford Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgford Foods has no effect on the direction of CECO Environmental i.e., CECO Environmental and Bridgford Foods go up and down completely randomly.

Pair Corralation between CECO Environmental and Bridgford Foods

Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 1.06 times more return on investment than Bridgford Foods. However, CECO Environmental is 1.06 times more volatile than Bridgford Foods. It trades about 0.09 of its potential returns per unit of risk. Bridgford Foods is currently generating about -0.14 per unit of risk. If you would invest  2,755  in CECO Environmental Corp on September 2, 2024 and sell it today you would earn a total of  450.00  from holding CECO Environmental Corp or generate 16.33% return on investment over 90 days.

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

CECO Environmental Corp  vs.  Bridgford Foods

CECO Environmental Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, CECO Environmental displayed solid returns over the last few months and may actually be approaching a breakup point.

Bridgford Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bridgford Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with CECO Environmental and Bridgford Foods

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

The idea behind CECO Environmental Corp and Bridgford Foods 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.