Correlation Between Marine Products and CECO Environmental

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

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

Diversification Opportunities for Marine Products and CECO Environmental

0.09

Correlation Coefficient

Marine Products  CECO Environmental

Significant diversification

The 3 months correlation between Marine and CECO is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Marine Products 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 Marine Products 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 Marine Products 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 Marine Products i.e., Marine Products and CECO Environmental go up and down completely randomly.

Pair Corralation between Marine Products and CECO Environmental

Considering the 90-day investment horizon Marine Products is expected to generate 0.63 times more return on investment than CECO Environmental. However, Marine Products is 1.58 times less risky than CECO Environmental. It trades about -0.19 of its potential returns per unit of risk. CECO Environmental Corp is currently generating about -0.14 per unit of risk. If you would invest  963.00  in Marine Products on October 12, 2024 and sell it today you would lose (61.00) from holding Marine Products or give up 6.33% of portfolio value over 90 days.

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

Marine Products  vs.  CECO Environmental Corp

Marine Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marine Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CECO Environmental Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 7 (%) 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 Marine Products and CECO Environmental

The main advantage of trading using opposite Marine Products and CECO Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marine Products 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 Marine Products 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.