Correlation Between CECO Environmental and American Environmental

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

Diversification Opportunities for CECO Environmental and American Environmental

0.0

Correlation Coefficient

CECO Environmental  American Environmental

Pay attention - limited upside

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

Pair Corralation between CECO Environmental and American Environmental

If you would invest  2,800  in CECO Environmental Corp on October 4, 2024 and sell it today you would earn a total of  283.00  from holding CECO Environmental Corp or generate 10.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

CECO Environmental Corp  vs.  American Environmental

CECO Environmental Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, CECO Environmental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

American Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, American Environmental is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CECO Environmental and American Environmental

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

The idea behind CECO Environmental Corp and American Environmental 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.