Correlation Between Lincoln Educational and CECO Environmental

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

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

Diversification Opportunities for Lincoln Educational and CECO Environmental

-0.36

Correlation Coefficient

Lincoln Educational  CECO Environmental

Very good diversification

The 3 months correlation between Lincoln and CECO is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Educational Services 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 Lincoln Educational 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 Lincoln Educational Services 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 Lincoln Educational i.e., Lincoln Educational and CECO Environmental go up and down completely randomly.

Pair Corralation between Lincoln Educational and CECO Environmental

Given the investment horizon of 90 days Lincoln Educational Services is expected to generate 1.27 times more return on investment than CECO Environmental. However, Lincoln Educational is 1.27 times more volatile than CECO Environmental Corp. It trades about 0.02 of its potential returns per unit of risk. CECO Environmental Corp is currently generating about -0.12 per unit of risk. If you would invest  1,581  in Lincoln Educational Services on December 28, 2024 and sell it today you would earn a total of  19.00  from holding Lincoln Educational Services or generate 1.2% return on investment over 90 days.

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

Lincoln Educational Services  vs.  CECO Environmental Corp

Lincoln Educational

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Educational Services are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lincoln Educational 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

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.

Pair Trading with Lincoln Educational and CECO Environmental

The main advantage of trading using opposite Lincoln Educational and CECO Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Educational 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 Lincoln Educational Services 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.