Correlation Between CECO Environmental and Baldwin Insurance

Can any of the company-specific risk be diversified away by investing in both CECO Environmental and Baldwin Insurance 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 Baldwin Insurance 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 The Baldwin Insurance, you can compare the effects of market volatilities on CECO Environmental and Baldwin Insurance 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 Baldwin Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and Baldwin Insurance.

Diversification Opportunities for CECO Environmental and Baldwin Insurance

-0.23

Correlation Coefficient

CECO Environmental  Baldwin Insurance

Very good diversification

The 3 months correlation between CECO and Baldwin is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and The Baldwin Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baldwin Insurance 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 Baldwin Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baldwin Insurance has no effect on the direction of CECO Environmental i.e., CECO Environmental and Baldwin Insurance go up and down completely randomly.

Pair Corralation between CECO Environmental and Baldwin Insurance

Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 1.02 times more return on investment than Baldwin Insurance. However, CECO Environmental is 1.02 times more volatile than The Baldwin Insurance. It trades about -0.03 of its potential returns per unit of risk. The Baldwin Insurance is currently generating about -0.25 per unit of risk. If you would invest  2,997  in CECO Environmental Corp on September 21, 2024 and sell it today you would lose (78.00) from holding CECO Environmental Corp or give up 2.6% of portfolio value over 90 days.

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

CECO Environmental Corp  vs.  The Baldwin Insurance

CECO Environmental Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, CECO Environmental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Baldwin Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Baldwin Insurance 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 very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with CECO Environmental and Baldwin Insurance

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

The idea behind CECO Environmental Corp and The Baldwin Insurance 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .