Correlation Between Gamma Communications and CECO ENVIRONMENTAL

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

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

Diversification Opportunities for Gamma Communications and CECO ENVIRONMENTAL

-0.01

Correlation Coefficient

Gamma Communications  CECO ENVIRONMENTAL

Good diversification

The 3 months correlation between Gamma and CECO is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications plc and CECO ENVIRONMENTAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO ENVIRONMENTAL and Gamma Communications 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 Gamma Communications plc 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 has no effect on the direction of Gamma Communications i.e., Gamma Communications and CECO ENVIRONMENTAL go up and down completely randomly.

Pair Corralation between Gamma Communications and CECO ENVIRONMENTAL

Assuming the 90 days horizon Gamma Communications is expected to generate 1.63 times less return on investment than CECO ENVIRONMENTAL. But when comparing it to its historical volatility, Gamma Communications plc is 1.25 times less risky than CECO ENVIRONMENTAL. It trades about 0.07 of its potential returns per unit of risk. CECO ENVIRONMENTAL is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,530  in CECO ENVIRONMENTAL on October 5, 2024 and sell it today you would earn a total of  1,530  from holding CECO ENVIRONMENTAL or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.68%
Values	Daily Returns

Gamma Communications plc  vs.  CECO ENVIRONMENTAL

Gamma Communications plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamma Communications plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

CECO ENVIRONMENTAL

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CECO ENVIRONMENTAL are ranked lower than 8 (%) 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.

Pair Trading with Gamma Communications and CECO ENVIRONMENTAL

The main advantage of trading using opposite Gamma Communications and CECO ENVIRONMENTAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications 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 Gamma Communications plc and CECO ENVIRONMENTAL 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.