Correlation Between CEA Industries and Terex

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

Diversification Opportunities for CEA Industries and Terex

-0.59

Correlation Coefficient

CEA Industries  Terex

Excellent diversification

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

Pair Corralation between CEA Industries and Terex

Assuming the 90 days horizon CEA Industries Warrant is expected to generate 10.32 times more return on investment than Terex. However, CEA Industries is 10.32 times more volatile than Terex. It trades about 0.12 of its potential returns per unit of risk. Terex is currently generating about -0.06 per unit of risk. 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	Moves Against
Strength	Very Weak
Accuracy	71.67%
Values	Daily Returns

CEA Industries Warrant  vs.  Terex

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.

Terex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Terex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with CEA Industries and Terex

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

The idea behind CEA Industries Warrant and Terex 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.