Correlation Between CECO Environmental and Stepstone

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

Diversification Opportunities for CECO Environmental and Stepstone

0.53

Correlation Coefficient

CECO Environmental  Stepstone

Very weak diversification

The 3 months correlation between CECO and Stepstone is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group 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 Stepstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepstone Group has no effect on the direction of CECO Environmental i.e., CECO Environmental and Stepstone go up and down completely randomly.

Pair Corralation between CECO Environmental and Stepstone

Given the investment horizon of 90 days CECO Environmental Corp is expected to under-perform the Stepstone. But the stock apears to be less risky and, when comparing its historical volatility, CECO Environmental Corp is 1.02 times less risky than Stepstone. The stock trades about -0.11 of its potential returns per unit of risk. The Stepstone Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  6,068  in Stepstone Group on December 26, 2024 and sell it today you would lose (352.00) from holding Stepstone Group or give up 5.8% of portfolio value over 90 days.

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

CECO Environmental Corp  vs.  Stepstone Group

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.

Stepstone Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stepstone Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Stepstone is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with CECO Environmental and Stepstone

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

The idea behind CECO Environmental Corp and Stepstone Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.