Correlation Between COLUMBIA SPORTSWEAR and CECO ENVIRONMENTAL

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

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

Diversification Opportunities for COLUMBIA SPORTSWEAR and CECO ENVIRONMENTAL

0.82

Correlation Coefficient

COLUMBIA SPORTSWEAR  CECO ENVIRONMENTAL

Very poor diversification

The 3 months correlation between COLUMBIA and CECO is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding COLUMBIA SPORTSWEAR and CECO ENVIRONMENTAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO ENVIRONMENTAL and COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR 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 has no effect on the direction of COLUMBIA SPORTSWEAR i.e., COLUMBIA SPORTSWEAR and CECO ENVIRONMENTAL go up and down completely randomly.

Pair Corralation between COLUMBIA SPORTSWEAR and CECO ENVIRONMENTAL

Assuming the 90 days trading horizon COLUMBIA SPORTSWEAR is expected to generate 19.18 times less return on investment than CECO ENVIRONMENTAL. But when comparing it to its historical volatility, COLUMBIA SPORTSWEAR is 2.14 times less risky than CECO ENVIRONMENTAL. It trades about 0.01 of its potential returns per unit of risk. CECO ENVIRONMENTAL is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,320  in CECO ENVIRONMENTAL on September 26, 2024 and sell it today you would earn a total of  1,486  from holding CECO ENVIRONMENTAL or generate 112.58% return on investment over 90 days.

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

COLUMBIA SPORTSWEAR  vs.  CECO ENVIRONMENTAL

COLUMBIA SPORTSWEAR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in COLUMBIA SPORTSWEAR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, COLUMBIA SPORTSWEAR unveiled solid returns over the last few months and may actually be approaching a breakup point.

CECO ENVIRONMENTAL

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CECO ENVIRONMENTAL are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CECO ENVIRONMENTAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COLUMBIA SPORTSWEAR and CECO ENVIRONMENTAL

The main advantage of trading using opposite COLUMBIA SPORTSWEAR and CECO ENVIRONMENTAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR and CECO ENVIRONMENTAL 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.