Correlation Between CECO Environmental and 06050WGU3

Can any of the company-specific risk be diversified away by investing in both CECO Environmental and 06050WGU3 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 06050WGU3 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 US06050WGU36, you can compare the effects of market volatilities on CECO Environmental and 06050WGU3 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 06050WGU3. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and 06050WGU3.

Diversification Opportunities for CECO Environmental and 06050WGU3

0.07

Correlation Coefficient

CECO Environmental  06050WGU3

Significant diversification

The 3 months correlation between CECO and 06050WGU3 is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and US06050WGU36 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US06050WGU36 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 06050WGU3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US06050WGU36 has no effect on the direction of CECO Environmental i.e., CECO Environmental and 06050WGU3 go up and down completely randomly.

Pair Corralation between CECO Environmental and 06050WGU3

Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 1.15 times more return on investment than 06050WGU3. However, CECO Environmental is 1.15 times more volatile than US06050WGU36. It trades about 0.07 of its potential returns per unit of risk. US06050WGU36 is currently generating about -0.03 per unit of risk. If you would invest  2,856  in CECO Environmental Corp on September 14, 2024 and sell it today you would earn a total of  365.00  from holding CECO Environmental Corp or generate 12.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	35.94%
Values	Daily Returns

CECO Environmental Corp  vs.  US06050WGU36

CECO Environmental Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 5 (%) 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.

US06050WGU36

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US06050WGU36 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 06050WGU3 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CECO Environmental and 06050WGU3

The main advantage of trading using opposite CECO Environmental and 06050WGU3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, 06050WGU3 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 06050WGU3 will offset losses from the drop in 06050WGU3's long position.

The idea behind CECO Environmental Corp and US06050WGU36 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.