Correlation Between Hunter Creek and CECO Environmental

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

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

Diversification Opportunities for Hunter Creek and CECO Environmental

0.0

Correlation Coefficient

Hunter Creek  CECO Environmental

Pay attention - limited upside

The 3 months correlation between Hunter and CECO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hunter Creek Mining 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 Hunter Creek 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 Hunter Creek Mining 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 Hunter Creek i.e., Hunter Creek and CECO Environmental go up and down completely randomly.

Pair Corralation between Hunter Creek and CECO Environmental

Given the investment horizon of 90 days Hunter Creek Mining is expected to generate 5.95 times more return on investment than CECO Environmental. However, Hunter Creek is 5.95 times more volatile than CECO Environmental Corp. It trades about 0.03 of its potential returns per unit of risk. CECO Environmental Corp is currently generating about 0.06 per unit of risk. If you would invest  20.00  in Hunter Creek Mining on October 26, 2024 and sell it today you would lose (10.20) from holding Hunter Creek Mining or give up 51.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Hunter Creek Mining  vs.  CECO Environmental Corp

Hunter Creek Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hunter Creek Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Hunter Creek is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

CECO Environmental Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 5 (%) 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 Hunter Creek and CECO Environmental

The main advantage of trading using opposite Hunter Creek and CECO Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hunter Creek 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 Hunter Creek Mining 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.