Correlation Between CECO Environmental and QBE Insurance

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

Diversification Opportunities for CECO Environmental and QBE Insurance

0.21

Correlation Coefficient

CECO Environmental  QBE Insurance

Modest diversification

The 3 months correlation between CECO and QBE is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and QBE Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QBE Insurance Group 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 QBE Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QBE Insurance Group has no effect on the direction of CECO Environmental i.e., CECO Environmental and QBE Insurance go up and down completely randomly.

Pair Corralation between CECO Environmental and QBE Insurance

Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 1.43 times more return on investment than QBE Insurance. However, CECO Environmental is 1.43 times more volatile than QBE Insurance Group. It trades about 0.09 of its potential returns per unit of risk. QBE Insurance Group is currently generating about 0.08 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

CECO Environmental Corp  vs.  QBE Insurance Group

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.

QBE Insurance Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, QBE Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CECO Environmental and QBE Insurance

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

The idea behind CECO Environmental Corp and QBE Insurance Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.