Correlation Between CEA Industries and Wabash National

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

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

Diversification Opportunities for CEA Industries and Wabash National

-0.36

Correlation Coefficient

CEA Industries  Wabash National

Very good diversification

The 3 months correlation between CEA and Wabash is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding CEA Industries and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National 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 Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of CEA Industries i.e., CEA Industries and Wabash National go up and down completely randomly.

Pair Corralation between CEA Industries and Wabash National

Given the investment horizon of 90 days CEA Industries is expected to under-perform the Wabash National. In addition to that, CEA Industries is 1.25 times more volatile than Wabash National. It trades about -0.05 of its total potential returns per unit of risk. Wabash National is currently generating about 0.04 per unit of volatility. If you would invest  1,898  in Wabash National on September 1, 2024 and sell it today you would earn a total of  85.00  from holding Wabash National or generate 4.48% return on investment over 90 days.

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

CEA Industries  vs.  Wabash National

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.

Wabash National

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wabash National are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Wabash National is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CEA Industries and Wabash National

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

The idea behind CEA Industries and Wabash National 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.