Correlation Between CECO Environmental and TOMI Environmental

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

Diversification Opportunities for CECO Environmental and TOMI Environmental

0.65

Correlation Coefficient

CECO Environmental  TOMI Environmental

Poor diversification

The 3 months correlation between CECO and TOMI is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and TOMI Environmental Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOMI 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 TOMI Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOMI Environmental has no effect on the direction of CECO Environmental i.e., CECO Environmental and TOMI Environmental go up and down completely randomly.

Pair Corralation between CECO Environmental and TOMI Environmental

Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 0.58 times more return on investment than TOMI Environmental. However, CECO Environmental Corp is 1.72 times less risky than TOMI Environmental. It trades about -0.1 of its potential returns per unit of risk. TOMI Environmental Solutions is currently generating about -0.06 per unit of risk. If you would invest  2,947  in CECO Environmental Corp on December 27, 2024 and sell it today you would lose (491.00) from holding CECO Environmental Corp or give up 16.66% 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.  TOMI Environmental Solutions

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.

TOMI Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days TOMI Environmental Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CECO Environmental and TOMI Environmental

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

The idea behind CECO Environmental Corp and TOMI Environmental Solutions 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.