Correlation Between CECO ENVIRONMENTAL and Perma-Fix Environmental

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

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

Diversification Opportunities for CECO ENVIRONMENTAL and Perma-Fix Environmental

0.16

Correlation Coefficient

CECO ENVIRONMENTAL  Perma-Fix Environmental

Average diversification

The 3 months correlation between CECO and Perma-Fix is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding CECO ENVIRONMENTAL and Perma Fix Environmental Servic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perma Fix Environmental 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 Perma-Fix Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perma Fix Environmental has no effect on the direction of CECO ENVIRONMENTAL i.e., CECO ENVIRONMENTAL and Perma-Fix Environmental go up and down completely randomly.

Pair Corralation between CECO ENVIRONMENTAL and Perma-Fix Environmental

Assuming the 90 days trading horizon CECO ENVIRONMENTAL is expected to generate 1.82 times less return on investment than Perma-Fix Environmental. In addition to that, CECO ENVIRONMENTAL is 1.04 times more volatile than Perma Fix Environmental Services. It trades about 0.08 of its total potential returns per unit of risk. Perma Fix Environmental Services is currently generating about 0.15 per unit of volatility. If you would invest  985.00  in Perma Fix Environmental Services on September 2, 2024 and sell it today you would earn a total of  365.00  from holding Perma Fix Environmental Services or generate 37.06% return on investment over 90 days.

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

CECO ENVIRONMENTAL  vs.  Perma Fix Environmental Servic

CECO ENVIRONMENTAL

Risk-Adjusted Performance

6 of 100

Modest

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

Perma Fix Environmental

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Perma Fix Environmental Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Perma-Fix Environmental reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CECO ENVIRONMENTAL and Perma-Fix Environmental

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

The idea behind CECO ENVIRONMENTAL and Perma Fix Environmental Services 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.