Correlation Between BBB Foods and CECO Environmental

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

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

Diversification Opportunities for BBB Foods and CECO Environmental

0.81

Correlation Coefficient

BBB Foods  CECO Environmental

Very poor diversification

The 3 months correlation between BBB and CECO is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods 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 BBB Foods 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 BBB Foods 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 BBB Foods i.e., BBB Foods and CECO Environmental go up and down completely randomly.

Pair Corralation between BBB Foods and CECO Environmental

Given the investment horizon of 90 days BBB Foods is expected to generate 0.88 times more return on investment than CECO Environmental. However, BBB Foods is 1.13 times less risky than CECO Environmental. It trades about -0.05 of its potential returns per unit of risk. CECO Environmental Corp is currently generating about -0.11 per unit of risk. If you would invest  2,932  in BBB Foods on December 27, 2024 and sell it today you would lose (265.00) from holding BBB Foods or give up 9.04% of portfolio value over 90 days.

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

BBB Foods  vs.  CECO Environmental Corp

BBB Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental drivers 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

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 BBB Foods and CECO Environmental

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