Correlation Between CECO Environmental and CONSTELLATION

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

Diversification Opportunities for CECO Environmental and CONSTELLATION

-0.46

Correlation Coefficient

CECO Environmental  CONSTELLATION

Very good diversification

The 3 months correlation between CECO and CONSTELLATION is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and CONSTELLATION ENERGY GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSTELLATION ENERGY 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 CONSTELLATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSTELLATION ENERGY has no effect on the direction of CECO Environmental i.e., CECO Environmental and CONSTELLATION go up and down completely randomly.

Pair Corralation between CECO Environmental and CONSTELLATION

Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 1.64 times more return on investment than CONSTELLATION. However, CECO Environmental is 1.64 times more volatile than CONSTELLATION ENERGY GROUP. It trades about -0.06 of its potential returns per unit of risk. CONSTELLATION ENERGY GROUP is currently generating about -0.22 per unit of risk. If you would invest  3,277  in CECO Environmental Corp on October 8, 2024 and sell it today you would lose (116.00) from holding CECO Environmental Corp or give up 3.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	68.42%
Values	Daily Returns

CECO Environmental Corp  vs.  CONSTELLATION ENERGY GROUP

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.

CONSTELLATION ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSTELLATION ENERGY GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CONSTELLATION ENERGY GROUP investors.

Pair Trading with CECO Environmental and CONSTELLATION

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

The idea behind CECO Environmental Corp and CONSTELLATION ENERGY 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.