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 ADR, 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

0.64

Correlation Coefficient

CECO Environmental  Umicore SA

Poor diversification

The 3 months correlation between CECO and Umicore is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Umicore SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Umicore SA ADR 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 ADR 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 under-perform the Umicore SA. But the stock apears to be less risky and, when comparing its historical volatility, CECO Environmental Corp is 1.06 times less risky than Umicore SA. The stock trades about -0.14 of its potential returns per unit of risk. The Umicore SA ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  256.00  in Umicore SA ADR on December 28, 2024 and sell it today you would earn a total of  14.00  from holding Umicore SA ADR or generate 5.47% return on investment over 90 days.

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

CECO Environmental Corp  vs.  Umicore SA ADR

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.

Umicore SA ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Umicore SA ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Umicore SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 ADR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.