Correlation Between Euro Tech and CECO Environmental

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

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

Diversification Opportunities for Euro Tech and CECO Environmental

-0.45

Correlation Coefficient

Euro Tech  CECO Environmental

Very good diversification

The 3 months correlation between Euro and CECO is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Euro Tech Holdings 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 Euro Tech 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 Euro Tech Holdings 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 Euro Tech i.e., Euro Tech and CECO Environmental go up and down completely randomly.

Pair Corralation between Euro Tech and CECO Environmental

Given the investment horizon of 90 days Euro Tech Holdings is expected to under-perform the CECO Environmental. But the stock apears to be less risky and, when comparing its historical volatility, Euro Tech Holdings is 2.29 times less risky than CECO Environmental. The stock trades about -0.03 of its potential returns per unit of risk. The CECO Environmental Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,677  in CECO Environmental Corp on September 25, 2024 and sell it today you would earn a total of  251.00  from holding CECO Environmental Corp or generate 9.38% return on investment over 90 days.

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

Euro Tech Holdings  vs.  CECO Environmental Corp

Euro Tech Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Euro Tech Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

CECO Environmental Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, CECO Environmental is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Euro Tech and CECO Environmental

The main advantage of trading using opposite Euro Tech and CECO Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Euro Tech 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 Euro Tech Holdings 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 Transaction History module to view history of all your transactions and understand their impact on performance.