Correlation Between CECO ENVIRONMENTAL and LONDON STEXUNSPADRS12

Can any of the company-specific risk be diversified away by investing in both CECO ENVIRONMENTAL and LONDON STEXUNSPADRS12 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 LONDON STEXUNSPADRS12 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CECO ENVIRONMENTAL and LONDON STEXUNSPADRS12, you can compare the effects of market volatilities on CECO ENVIRONMENTAL and LONDON STEXUNSPADRS12 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 LONDON STEXUNSPADRS12. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO ENVIRONMENTAL and LONDON STEXUNSPADRS12.

Diversification Opportunities for CECO ENVIRONMENTAL and LONDON STEXUNSPADRS12

0.64

Correlation Coefficient

CECO ENVIRONMENTAL  LONDON STEXUNSPADRS12

Poor diversification

The 3 months correlation between CECO and LONDON is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CECO ENVIRONMENTAL and LONDON STEXUNSPADRS12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LONDON STEXUNSPADRS12 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 are associated (or correlated) with LONDON STEXUNSPADRS12. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LONDON STEXUNSPADRS12 has no effect on the direction of CECO ENVIRONMENTAL i.e., CECO ENVIRONMENTAL and LONDON STEXUNSPADRS12 go up and down completely randomly.

Pair Corralation between CECO ENVIRONMENTAL and LONDON STEXUNSPADRS12

Assuming the 90 days trading horizon CECO ENVIRONMENTAL is expected to generate 1.52 times more return on investment than LONDON STEXUNSPADRS12. However, CECO ENVIRONMENTAL is 1.52 times more volatile than LONDON STEXUNSPADRS12. It trades about 0.2 of its potential returns per unit of risk. LONDON STEXUNSPADRS12 is currently generating about 0.19 per unit of risk. If you would invest  2,650  in CECO ENVIRONMENTAL on September 20, 2024 and sell it today you would earn a total of  288.00  from holding CECO ENVIRONMENTAL or generate 10.87% return on investment over 90 days.

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

CECO ENVIRONMENTAL  vs.  LONDON STEXUNSPADRS12

CECO ENVIRONMENTAL

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CECO ENVIRONMENTAL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CECO ENVIRONMENTAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

LONDON STEXUNSPADRS12

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LONDON STEXUNSPADRS12 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LONDON STEXUNSPADRS12 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CECO ENVIRONMENTAL and LONDON STEXUNSPADRS12

The main advantage of trading using opposite CECO ENVIRONMENTAL and LONDON STEXUNSPADRS12 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO ENVIRONMENTAL position performs unexpectedly, LONDON STEXUNSPADRS12 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 LONDON STEXUNSPADRS12 will offset losses from the drop in LONDON STEXUNSPADRS12's long position.

The idea behind CECO ENVIRONMENTAL and LONDON STEXUNSPADRS12 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.