Correlation Between CEA Industries and Textainer Group

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

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

Diversification Opportunities for CEA Industries and Textainer Group

-0.35

Correlation Coefficient

CEA Industries  Textainer Group

Very good diversification

The 3 months correlation between CEA and Textainer is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding CEA Industries and Textainer Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textainer Group Holdings 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 Textainer Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textainer Group Holdings has no effect on the direction of CEA Industries i.e., CEA Industries and Textainer Group go up and down completely randomly.

Pair Corralation between CEA Industries and Textainer Group

Given the investment horizon of 90 days CEA Industries is expected to generate 1.15 times more return on investment than Textainer Group. However, CEA Industries is 1.15 times more volatile than Textainer Group Holdings. It trades about -0.04 of its potential returns per unit of risk. Textainer Group Holdings is currently generating about -0.06 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

CEA Industries  vs.  Textainer Group Holdings

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.

Textainer Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Textainer Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CEA Industries and Textainer Group

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

The idea behind CEA Industries and Textainer Group Holdings 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.