Correlation Between CECO Environmental and Supercom

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

Diversification Opportunities for CECO Environmental and Supercom

-0.02

Correlation Coefficient

CECO Environmental  Supercom

Good diversification

The 3 months correlation between CECO and Supercom is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Supercom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supercom 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 Supercom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supercom has no effect on the direction of CECO Environmental i.e., CECO Environmental and Supercom go up and down completely randomly.

Pair Corralation between CECO Environmental and Supercom

Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 0.34 times more return on investment than Supercom. However, CECO Environmental Corp is 2.98 times less risky than Supercom. It trades about 0.07 of its potential returns per unit of risk. Supercom is currently generating about -0.01 per unit of risk. If you would invest  1,168  in CECO Environmental Corp on September 20, 2024 and sell it today you would earn a total of  1,751  from holding CECO Environmental Corp or generate 149.91% return on investment over 90 days.

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

CECO Environmental Corp  vs.  Supercom

CECO Environmental Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 2 (%) 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.

Supercom

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Supercom are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Supercom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CECO Environmental and Supercom

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

The idea behind CECO Environmental Corp and Supercom 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.