Correlation Between CECO Environmental and BAKER

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

Diversification Opportunities for CECO Environmental and BAKER

0.31

Correlation Coefficient

CECO Environmental  BAKER

Weak diversification

The 3 months correlation between CECO and BAKER is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and BAKER HUGHES A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAKER HUGHES A 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 BAKER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAKER HUGHES A has no effect on the direction of CECO Environmental i.e., CECO Environmental and BAKER go up and down completely randomly.

Pair Corralation between CECO Environmental and BAKER

Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 10.0 times more return on investment than BAKER. However, CECO Environmental is 10.0 times more volatile than BAKER HUGHES A. It trades about 0.07 of its potential returns per unit of risk. BAKER HUGHES A is currently generating about -0.11 per unit of risk. If you would invest  2,654  in CECO Environmental Corp on October 23, 2024 and sell it today you would earn a total of  306.00  from holding CECO Environmental Corp or generate 11.53% return on investment over 90 days.

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

CECO Environmental Corp  vs.  BAKER HUGHES A

CECO Environmental Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 5 (%) 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.

BAKER HUGHES A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAKER HUGHES A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BAKER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CECO Environmental and BAKER

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

The idea behind CECO Environmental Corp and BAKER HUGHES A 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.