Correlation Between Huadi International and CECO Environmental

Can any of the company-specific risk be diversified away by investing in both Huadi International and CECO Environmental 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 Huadi International and CECO Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huadi International Group and CECO Environmental Corp, you can compare the effects of market volatilities on Huadi International and CECO Environmental 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 Huadi International with a short position of CECO Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huadi International and CECO Environmental.

Diversification Opportunities for Huadi International and CECO Environmental

-0.3

Correlation Coefficient

Huadi International  CECO Environmental

Very good diversification

The 3 months correlation between Huadi and CECO is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Huadi International Group and CECO Environmental Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO Environmental Corp and Huadi International 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 Huadi International Group are associated (or correlated) with CECO Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CECO Environmental Corp has no effect on the direction of Huadi International i.e., Huadi International and CECO Environmental go up and down completely randomly.

Pair Corralation between Huadi International and CECO Environmental

Given the investment horizon of 90 days Huadi International Group is expected to under-perform the CECO Environmental. In addition to that, Huadi International is 1.48 times more volatile than CECO Environmental Corp. It trades about -0.04 of its total potential returns per unit of risk. CECO Environmental Corp is currently generating about 0.05 per unit of volatility. If you would invest  2,768  in CECO Environmental Corp on September 23, 2024 and sell it today you would earn a total of  181.00  from holding CECO Environmental Corp or generate 6.54% return on investment over 90 days.

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

Huadi International Group  vs.  CECO Environmental Corp

Huadi International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huadi International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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.

Pair Trading with Huadi International and CECO Environmental

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

The idea behind Huadi International Group and CECO Environmental Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.