Correlation Between CECO Environmental and Enersys

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

Diversification Opportunities for CECO Environmental and Enersys

-0.48

Correlation Coefficient

CECO Environmental  Enersys

Very good diversification

The 3 months correlation between CECO and Enersys is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Enersys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enersys 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 Enersys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enersys has no effect on the direction of CECO Environmental i.e., CECO Environmental and Enersys go up and down completely randomly.

Pair Corralation between CECO Environmental and Enersys

Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 1.6 times more return on investment than Enersys. However, CECO Environmental is 1.6 times more volatile than Enersys. It trades about 0.07 of its potential returns per unit of risk. Enersys is currently generating about 0.03 per unit of risk. If you would invest  1,224  in CECO Environmental Corp on September 28, 2024 and sell it today you would earn a total of  1,723  from holding CECO Environmental Corp or generate 140.77% return on investment over 90 days.

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

CECO Environmental Corp  vs.  Enersys

CECO Environmental Corp

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, CECO Environmental is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Enersys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enersys has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with CECO Environmental and Enersys

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

The idea behind CECO Environmental Corp and Enersys 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.