Correlation Between CEA Industries and Buhler Industries

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

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

Diversification Opportunities for CEA Industries and Buhler Industries

0.0

Correlation Coefficient

CEA Industries  Buhler Industries

Pay attention - limited upside

The 3 months correlation between CEA and Buhler is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CEA Industries Warrant and Buhler Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buhler 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 Warrant are associated (or correlated) with Buhler Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buhler Industries has no effect on the direction of CEA Industries i.e., CEA Industries and Buhler Industries go up and down completely randomly.

Pair Corralation between CEA Industries and Buhler Industries

If you would invest  1.25  in CEA Industries Warrant on December 27, 2024 and sell it today you would earn a total of  0.21  from holding CEA Industries Warrant or generate 16.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	68.25%
Values	Daily Returns

CEA Industries Warrant  vs.  Buhler Industries

CEA Industries Warrant

Risk-Adjusted Performance

OK

Over the last 90 days CEA Industries Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unsteady fundamental indicators, CEA Industries showed solid returns over the last few months and may actually be approaching a breakup point.

Buhler Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Buhler Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Buhler Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CEA Industries and Buhler Industries

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

The idea behind CEA Industries Warrant and Buhler 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.