Correlation Between CECO Environmental and Umicore SA

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

Diversification Opportunities for CECO Environmental and Umicore SA

-0.47

Correlation Coefficient

CECO Environmental  Umicore SA

Very good diversification

The 3 months correlation between CECO and Umicore is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Umicore SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Umicore SA 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 Umicore SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Umicore SA has no effect on the direction of CECO Environmental i.e., CECO Environmental and Umicore SA go up and down completely randomly.

Pair Corralation between CECO Environmental and Umicore SA

Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 0.83 times more return on investment than Umicore SA. However, CECO Environmental Corp is 1.21 times less risky than Umicore SA. It trades about -0.05 of its potential returns per unit of risk. Umicore SA is currently generating about -0.18 per unit of risk. If you would invest  3,270  in CECO Environmental Corp on October 6, 2024 and sell it today you would lose (109.00) from holding CECO Environmental Corp or give up 3.33% of portfolio value over 90 days.

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

CECO Environmental Corp  vs.  Umicore SA

CECO Environmental Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 6 (%) 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.

Umicore SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Umicore SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CECO Environmental and Umicore SA

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

The idea behind CECO Environmental Corp and Umicore SA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.