Correlation Between CECO Environmental and United States

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

Diversification Opportunities for CECO Environmental and United States

-0.68

Correlation Coefficient

CECO Environmental  United States

Excellent diversification

The 3 months correlation between CECO and United is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of CECO Environmental i.e., CECO Environmental and United States go up and down completely randomly.

Pair Corralation between CECO Environmental and United States

Given the investment horizon of 90 days CECO Environmental Corp is expected to under-perform the United States. But the stock apears to be less risky and, when comparing its historical volatility, CECO Environmental Corp is 1.11 times less risky than United States. The stock trades about -0.11 of its potential returns per unit of risk. The United States Steel is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,096  in United States Steel on December 26, 2024 and sell it today you would earn a total of  1,200  from holding United States Steel or generate 38.76% return on investment over 90 days.

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

CECO Environmental Corp  vs.  United States Steel

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.

United States Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, United States showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CECO Environmental and United States

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

The idea behind CECO Environmental Corp and United States Steel 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.