Correlation Between Solstad Offshore and CECO ENVIRONMENTAL

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

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

Diversification Opportunities for Solstad Offshore and CECO ENVIRONMENTAL

0.77

Correlation Coefficient

Solstad Offshore  CECO ENVIRONMENTAL

Poor diversification

The 3 months correlation between Solstad and CECO is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Solstad Offshore ASA and CECO ENVIRONMENTAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO ENVIRONMENTAL and Solstad Offshore 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 Solstad Offshore ASA 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 Solstad Offshore i.e., Solstad Offshore and CECO ENVIRONMENTAL go up and down completely randomly.

Pair Corralation between Solstad Offshore and CECO ENVIRONMENTAL

Assuming the 90 days trading horizon Solstad Offshore ASA is expected to generate 0.54 times more return on investment than CECO ENVIRONMENTAL. However, Solstad Offshore ASA is 1.84 times less risky than CECO ENVIRONMENTAL. It trades about -0.02 of its potential returns per unit of risk. CECO ENVIRONMENTAL is currently generating about -0.08 per unit of risk. If you would invest  330.00  in Solstad Offshore ASA on December 30, 2024 and sell it today you would lose (11.00) from holding Solstad Offshore ASA or give up 3.33% of portfolio value over 90 days.

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

Solstad Offshore ASA  vs.  CECO ENVIRONMENTAL

Solstad Offshore ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solstad Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Solstad Offshore is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

CECO ENVIRONMENTAL

Risk-Adjusted Performance

Very Weak

Over the last 90 days CECO ENVIRONMENTAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Solstad Offshore and CECO ENVIRONMENTAL

The main advantage of trading using opposite Solstad Offshore and CECO ENVIRONMENTAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solstad Offshore 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 Solstad Offshore ASA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.