Correlation Between CEA Industries and Manitowoc

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

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

Diversification Opportunities for CEA Industries and Manitowoc

-0.44

Correlation Coefficient

CEA Industries  Manitowoc

Very good diversification

The 3 months correlation between CEA and Manitowoc is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding CEA Industries and Manitowoc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manitowoc 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 Manitowoc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manitowoc has no effect on the direction of CEA Industries i.e., CEA Industries and Manitowoc go up and down completely randomly.

Pair Corralation between CEA Industries and Manitowoc

Given the investment horizon of 90 days CEA Industries is expected to under-perform the Manitowoc. But the stock apears to be less risky and, when comparing its historical volatility, CEA Industries is 1.37 times less risky than Manitowoc. The stock trades about -0.05 of its potential returns per unit of risk. The Manitowoc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  976.00  in Manitowoc on September 1, 2024 and sell it today you would earn a total of  87.00  from holding Manitowoc or generate 8.91% 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.  Manitowoc

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.

Manitowoc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Manitowoc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Manitowoc may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with CEA Industries and Manitowoc

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

The idea behind CEA Industries and Manitowoc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.