Correlation Between CEA Industries and Gencor Industries

Can any of the company-specific risk be diversified away by investing in both CEA Industries and Gencor 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 Gencor 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 Gencor Industries, you can compare the effects of market volatilities on CEA Industries and Gencor 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 Gencor Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEA Industries and Gencor Industries.

Diversification Opportunities for CEA Industries and Gencor Industries

-0.59

Correlation Coefficient

CEA Industries  Gencor Industries

Excellent diversification

The 3 months correlation between CEA and Gencor is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding CEA Industries and Gencor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gencor 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 Gencor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gencor Industries has no effect on the direction of CEA Industries i.e., CEA Industries and Gencor Industries go up and down completely randomly.

Pair Corralation between CEA Industries and Gencor Industries

Given the investment horizon of 90 days CEA Industries is expected to generate 1.59 times more return on investment than Gencor Industries. However, CEA Industries is 1.59 times more volatile than Gencor Industries. It trades about -0.04 of its potential returns per unit of risk. Gencor Industries is currently generating about -0.16 per unit of risk. If you would invest  800.00  in CEA Industries on October 20, 2024 and sell it today you would lose (40.00) from holding CEA Industries or give up 5.0% of portfolio value over 90 days.

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

CEA Industries  vs.  Gencor Industries

CEA Industries

Risk-Adjusted Performance

3 of 100

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.

Gencor Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gencor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with CEA Industries and Gencor Industries

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

The idea behind CEA Industries and Gencor 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.