Correlation Between CECO Environmental and 40434LAL9

Can any of the company-specific risk be diversified away by investing in both CECO Environmental and 40434LAL9 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 40434LAL9 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 HPQ 42 15 APR 32, you can compare the effects of market volatilities on CECO Environmental and 40434LAL9 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 40434LAL9. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and 40434LAL9.

Diversification Opportunities for CECO Environmental and 40434LAL9

-0.58

Correlation Coefficient

CECO Environmental  40434LAL9

Excellent diversification

The 3 months correlation between CECO and 40434LAL9 is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and HPQ 42 15 APR 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HPQ 42 15 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 40434LAL9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HPQ 42 15 has no effect on the direction of CECO Environmental i.e., CECO Environmental and 40434LAL9 go up and down completely randomly.

Pair Corralation between CECO Environmental and 40434LAL9

Given the investment horizon of 90 days CECO Environmental Corp is expected to under-perform the 40434LAL9. In addition to that, CECO Environmental is 5.19 times more volatile than HPQ 42 15 APR 32. It trades about -0.09 of its total potential returns per unit of risk. HPQ 42 15 APR 32 is currently generating about 0.01 per unit of volatility. If you would invest  9,377  in HPQ 42 15 APR 32 on December 23, 2024 and sell it today you would earn a total of  38.00  from holding HPQ 42 15 APR 32 or generate 0.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

CECO Environmental Corp  vs.  HPQ 42 15 APR 32

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.

HPQ 42 15

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HPQ 42 15 APR 32 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 40434LAL9 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 40434LAL9

The main advantage of trading using opposite CECO Environmental and 40434LAL9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, 40434LAL9 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 40434LAL9 will offset losses from the drop in 40434LAL9's long position.

The idea behind CECO Environmental Corp and HPQ 42 15 APR 32 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.