Correlation Between CECO Environmental and Cementos Pacasmayo

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

By analyzing existing cross correlation between CECO Environmental Corp and Cementos Pacasmayo SAA, you can compare the effects of market volatilities on CECO Environmental and Cementos Pacasmayo 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 CECO Environmental with a short position of Cementos Pacasmayo. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and Cementos Pacasmayo.

Diversification Opportunities for CECO Environmental and Cementos Pacasmayo

-0.14

Correlation Coefficient

CECO Environmental  Cementos Pacasmayo

Good diversification

The 3 months correlation between CECO and Cementos is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Cementos Pacasmayo SAA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cementos Pacasmayo SAA and CECO Environmental 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 CECO Environmental Corp are associated (or correlated) with Cementos Pacasmayo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cementos Pacasmayo SAA has no effect on the direction of CECO Environmental i.e., CECO Environmental and Cementos Pacasmayo go up and down completely randomly.

Pair Corralation between CECO Environmental and Cementos Pacasmayo

Given the investment horizon of 90 days CECO Environmental Corp is expected to under-perform the Cementos Pacasmayo. In addition to that, CECO Environmental is 1.45 times more volatile than Cementos Pacasmayo SAA. It trades about -0.16 of its total potential returns per unit of risk. Cementos Pacasmayo SAA is currently generating about 0.0 per unit of volatility. If you would invest  589.00  in Cementos Pacasmayo SAA on December 4, 2024 and sell it today you would lose (9.00) from holding Cementos Pacasmayo SAA or give up 1.53% of portfolio value over 90 days.

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

CECO Environmental Corp  vs.  Cementos Pacasmayo SAA

CECO Environmental Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days CECO Environmental Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Cementos Pacasmayo SAA

Risk-Adjusted Performance

Weak

Over the last 90 days Cementos Pacasmayo SAA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cementos Pacasmayo is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CECO Environmental and Cementos Pacasmayo

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

The idea behind CECO Environmental Corp and Cementos Pacasmayo SAA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.