Correlation Between CECO ENVIRONMENTAL and Shenandoah Telecommunicatio

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

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

Diversification Opportunities for CECO ENVIRONMENTAL and Shenandoah Telecommunicatio

-0.18

Correlation Coefficient

CECO ENVIRONMENTAL  Shenandoah Telecommunicatio

Good diversification

The 3 months correlation between CECO and Shenandoah is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding CECO ENVIRONMENTAL and Shenandoah Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenandoah Telecommunicatio 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 Shenandoah Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenandoah Telecommunicatio has no effect on the direction of CECO ENVIRONMENTAL i.e., CECO ENVIRONMENTAL and Shenandoah Telecommunicatio go up and down completely randomly.

Pair Corralation between CECO ENVIRONMENTAL and Shenandoah Telecommunicatio

Assuming the 90 days trading horizon CECO ENVIRONMENTAL is expected to generate 0.93 times more return on investment than Shenandoah Telecommunicatio. However, CECO ENVIRONMENTAL is 1.08 times less risky than Shenandoah Telecommunicatio. It trades about 0.07 of its potential returns per unit of risk. Shenandoah Telecommunications is currently generating about 0.01 per unit of risk. If you would invest  2,500  in CECO ENVIRONMENTAL on September 30, 2024 and sell it today you would earn a total of  300.00  from holding CECO ENVIRONMENTAL or generate 12.0% return on investment over 90 days.

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

CECO ENVIRONMENTAL  vs.  Shenandoah Telecommunications

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.

Shenandoah Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenandoah Telecommunications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Shenandoah Telecommunicatio is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CECO ENVIRONMENTAL and Shenandoah Telecommunicatio

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

The idea behind CECO ENVIRONMENTAL and Shenandoah Telecommunications 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.