Correlation Between ClearSign Combustion and CECO Environmental

Can any of the company-specific risk be diversified away by investing in both ClearSign Combustion and CECO Environmental 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 ClearSign Combustion and CECO Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ClearSign Combustion and CECO Environmental Corp, you can compare the effects of market volatilities on ClearSign Combustion and CECO Environmental 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 ClearSign Combustion with a short position of CECO Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of ClearSign Combustion and CECO Environmental.

Diversification Opportunities for ClearSign Combustion and CECO Environmental

0.71

Correlation Coefficient

ClearSign Combustion  CECO Environmental

Poor diversification

The 3 months correlation between ClearSign and CECO is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding ClearSign Combustion and CECO Environmental Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO Environmental Corp and ClearSign Combustion 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 ClearSign Combustion are associated (or correlated) with CECO Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CECO Environmental Corp has no effect on the direction of ClearSign Combustion i.e., ClearSign Combustion and CECO Environmental go up and down completely randomly.

Pair Corralation between ClearSign Combustion and CECO Environmental

Given the investment horizon of 90 days ClearSign Combustion is expected to generate 1.76 times more return on investment than CECO Environmental. However, ClearSign Combustion is 1.76 times more volatile than CECO Environmental Corp. It trades about 0.05 of its potential returns per unit of risk. CECO Environmental Corp is currently generating about 0.07 per unit of risk. If you would invest  102.00  in ClearSign Combustion on October 3, 2024 and sell it today you would earn a total of  42.00  from holding ClearSign Combustion or generate 41.18% return on investment over 90 days.

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

ClearSign Combustion  vs.  CECO Environmental Corp

ClearSign Combustion

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ClearSign Combustion are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, ClearSign Combustion reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with ClearSign Combustion and CECO Environmental

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

The idea behind ClearSign Combustion and CECO Environmental Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.