Correlation Between CEA Industries and Columbus McKinnon

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

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

Diversification Opportunities for CEA Industries and Columbus McKinnon

-0.51

Correlation Coefficient

CEA Industries  Columbus McKinnon

Excellent diversification

The 3 months correlation between CEA and Columbus is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding CEA Industries and Columbus McKinnon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbus McKinnon 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 Columbus McKinnon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbus McKinnon has no effect on the direction of CEA Industries i.e., CEA Industries and Columbus McKinnon go up and down completely randomly.

Pair Corralation between CEA Industries and Columbus McKinnon

Given the investment horizon of 90 days CEA Industries is expected to under-perform the Columbus McKinnon. In addition to that, CEA Industries is 1.12 times more volatile than Columbus McKinnon. It trades about -0.05 of its total potential returns per unit of risk. Columbus McKinnon is currently generating about 0.14 per unit of volatility. If you would invest  3,267  in Columbus McKinnon on September 1, 2024 and sell it today you would earn a total of  662.00  from holding Columbus McKinnon or generate 20.26% return on investment over 90 days.

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

CEA Industries  vs.  Columbus McKinnon

CEA Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CEA Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Columbus McKinnon

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbus McKinnon are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Columbus McKinnon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CEA Industries and Columbus McKinnon

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

The idea behind CEA Industries and Columbus McKinnon 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 Stocks Directory module to find actively traded stocks across global markets.