Correlation Between CECO Environmental and USA Recycling

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

Diversification Opportunities for CECO Environmental and USA Recycling

-0.55

Correlation Coefficient

CECO Environmental  USA Recycling

Excellent diversification

The 3 months correlation between CECO and USA is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and USA Recycling Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USA Recycling Industries 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 USA Recycling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USA Recycling Industries has no effect on the direction of CECO Environmental i.e., CECO Environmental and USA Recycling go up and down completely randomly.

Pair Corralation between CECO Environmental and USA Recycling

Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 0.11 times more return on investment than USA Recycling. However, CECO Environmental Corp is 8.84 times less risky than USA Recycling. It trades about -0.24 of its potential returns per unit of risk. USA Recycling Industries is currently generating about -0.22 per unit of risk. If you would invest  3,299  in CECO Environmental Corp on September 25, 2024 and sell it today you would lose (373.00) from holding CECO Environmental Corp or give up 11.31% 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.  USA Recycling Industries

CECO Environmental Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, CECO Environmental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

USA Recycling Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days USA Recycling Industries 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 basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with CECO Environmental and USA Recycling

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

The idea behind CECO Environmental Corp and USA Recycling Industries 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.