Correlation Between CECO Environmental and Sphere Entertainment

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

Diversification Opportunities for CECO Environmental and Sphere Entertainment

-0.55

Correlation Coefficient

CECO Environmental  Sphere Entertainment

Excellent diversification

The 3 months correlation between CECO and Sphere is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of CECO Environmental i.e., CECO Environmental and Sphere Entertainment go up and down completely randomly.

Pair Corralation between CECO Environmental and Sphere Entertainment

Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 1.06 times more return on investment than Sphere Entertainment. However, CECO Environmental is 1.06 times more volatile than Sphere Entertainment Co. It trades about 0.08 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about 0.03 per unit of risk. If you would invest  2,058  in CECO Environmental Corp on September 13, 2024 and sell it today you would earn a total of  1,393  from holding CECO Environmental Corp or generate 67.69% 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.  Sphere Entertainment Co

CECO Environmental Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, CECO Environmental displayed solid returns over the last few months and may actually be approaching a breakup point.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with CECO Environmental and Sphere Entertainment

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

The idea behind CECO Environmental Corp and Sphere Entertainment Co 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.