Correlation Between Shyft and CEA Industries

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

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

Diversification Opportunities for Shyft and CEA Industries

-0.39

Correlation Coefficient

Shyft  CEA Industries

Very good diversification

The 3 months correlation between Shyft and CEA is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shyft Group and CEA Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEA Industries and Shyft 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 Shyft Group are associated (or correlated) with CEA Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEA Industries has no effect on the direction of Shyft i.e., Shyft and CEA Industries go up and down completely randomly.

Pair Corralation between Shyft and CEA Industries

Given the investment horizon of 90 days Shyft Group is expected to under-perform the CEA Industries. But the stock apears to be less risky and, when comparing its historical volatility, Shyft Group is 1.09 times less risky than CEA Industries. The stock trades about -0.04 of its potential returns per unit of risk. The CEA Industries is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  704.00  in CEA Industries on September 24, 2024 and sell it today you would earn a total of  108.00  from holding CEA Industries or generate 15.34% return on investment over 90 days.

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

Shyft Group  vs.  CEA Industries

Shyft Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shyft Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CEA Industries

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CEA Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, CEA Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shyft and CEA Industries

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

The idea behind Shyft Group and CEA Industries 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.