Correlation Between CECO Environmental and Infosys

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

Diversification Opportunities for CECO Environmental and Infosys

0.77

Correlation Coefficient

CECO Environmental  Infosys

Poor diversification

The 3 months correlation between CECO and Infosys is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Infosys Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Ltd ADR 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 Infosys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infosys Ltd ADR has no effect on the direction of CECO Environmental i.e., CECO Environmental and Infosys go up and down completely randomly.

Pair Corralation between CECO Environmental and Infosys

Given the investment horizon of 90 days CECO Environmental Corp is expected to under-perform the Infosys. In addition to that, CECO Environmental is 2.02 times more volatile than Infosys Ltd ADR. It trades about -0.13 of its total potential returns per unit of risk. Infosys Ltd ADR is currently generating about -0.11 per unit of volatility. If you would invest  2,220  in Infosys Ltd ADR on December 2, 2024 and sell it today you would lose (210.00) from holding Infosys Ltd ADR or give up 9.46% of portfolio value over 90 days.

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

CECO Environmental Corp  vs.  Infosys Ltd ADR

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.

Infosys Ltd ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Infosys Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent 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 CECO Environmental and Infosys

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

The idea behind CECO Environmental Corp and Infosys Ltd ADR 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.