Correlation Between CECO Environmental and Primoris Services

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

Diversification Opportunities for CECO Environmental and Primoris Services

0.28

Correlation Coefficient

CECO Environmental  Primoris Services

Modest diversification

The 3 months correlation between CECO and Primoris is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Primoris Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primoris Services 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 Primoris Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primoris Services has no effect on the direction of CECO Environmental i.e., CECO Environmental and Primoris Services go up and down completely randomly.

Pair Corralation between CECO Environmental and Primoris Services

Given the investment horizon of 90 days CECO Environmental is expected to generate 2.71 times less return on investment than Primoris Services. In addition to that, CECO Environmental is 1.35 times more volatile than Primoris Services. It trades about 0.09 of its total potential returns per unit of risk. Primoris Services is currently generating about 0.32 per unit of volatility. If you would invest  5,127  in Primoris Services on September 1, 2024 and sell it today you would earn a total of  3,244  from holding Primoris Services or generate 63.27% return on investment over 90 days.

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

CECO Environmental Corp  vs.  Primoris Services

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.

Primoris Services

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Primoris Services are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Primoris Services displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CECO Environmental and Primoris Services

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

The idea behind CECO Environmental Corp and Primoris Services 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.