Correlation Between CEA Industries and Astec Industries

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

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

Diversification Opportunities for CEA Industries and Astec Industries

-0.28

Correlation Coefficient

CEA Industries  Astec Industries

Very good diversification

The 3 months correlation between CEA and Astec is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding CEA Industries and Astec Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astec Industries and CEA Industries 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 CEA Industries are associated (or correlated) with Astec Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astec Industries has no effect on the direction of CEA Industries i.e., CEA Industries and Astec Industries go up and down completely randomly.

Pair Corralation between CEA Industries and Astec Industries

Given the investment horizon of 90 days CEA Industries is expected to generate 2.35 times more return on investment than Astec Industries. However, CEA Industries is 2.35 times more volatile than Astec Industries. It trades about 0.04 of its potential returns per unit of risk. Astec Industries is currently generating about 0.07 per unit of risk. If you would invest  781.00  in CEA Industries on December 27, 2024 and sell it today you would earn a total of  19.00  from holding CEA Industries or generate 2.43% return on investment over 90 days.

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

CEA Industries  vs.  Astec Industries

CEA Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CEA Industries are ranked lower than 2 (%) 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.

Astec Industries

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Astec Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Astec Industries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CEA Industries and Astec Industries

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

The idea behind CEA Industries and Astec 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.