Correlation Between CEA Industries and CubicFarm Systems

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

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

Diversification Opportunities for CEA Industries and CubicFarm Systems

0.49

Correlation Coefficient

CEA Industries  CubicFarm Systems

Very weak diversification

The 3 months correlation between CEA and CubicFarm is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CEA Industries and CubicFarm Systems Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CubicFarm Systems Corp 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 CubicFarm Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CubicFarm Systems Corp has no effect on the direction of CEA Industries i.e., CEA Industries and CubicFarm Systems go up and down completely randomly.

Pair Corralation between CEA Industries and CubicFarm Systems

Given the investment horizon of 90 days CEA Industries is expected to generate 119.54 times less return on investment than CubicFarm Systems. But when comparing it to its historical volatility, CEA Industries is 31.52 times less risky than CubicFarm Systems. It trades about 0.05 of its potential returns per unit of risk. CubicFarm Systems Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  8.00  in CubicFarm Systems Corp on December 5, 2024 and sell it today you would earn a total of  17.00  from holding CubicFarm Systems Corp or generate 212.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

CEA Industries  vs.  CubicFarm Systems Corp

CEA Industries

Risk-Adjusted Performance

Weak

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 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CubicFarm Systems Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CubicFarm Systems Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, CubicFarm Systems reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CEA Industries and CubicFarm Systems

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

The idea behind CEA Industries and CubicFarm Systems Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.