Correlation Between Austin Engineering and CEA Industries

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

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

Diversification Opportunities for Austin Engineering and CEA Industries

-0.27

Correlation Coefficient

Austin Engineering  CEA Industries

Very good diversification

The 3 months correlation between Austin and CEA is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Austin Engineering Limited and CEA Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEA Industries and Austin Engineering 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 Austin Engineering Limited 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 Austin Engineering i.e., Austin Engineering and CEA Industries go up and down completely randomly.

Pair Corralation between Austin Engineering and CEA Industries

Assuming the 90 days horizon Austin Engineering Limited is expected to under-perform the CEA Industries. But the pink sheet apears to be less risky and, when comparing its historical volatility, Austin Engineering Limited is 1.22 times less risky than CEA Industries. The pink sheet trades about -0.11 of its potential returns per unit of risk. The CEA Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  770.00  in CEA Industries on December 28, 2024 and sell it today you would earn a total of  50.00  from holding CEA Industries or generate 6.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Austin Engineering Limited  vs.  CEA Industries

Austin Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Austin Engineering Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CEA Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CEA Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, CEA Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Austin Engineering and CEA Industries

The main advantage of trading using opposite Austin Engineering and CEA Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Austin Engineering 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 Austin Engineering Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.