Correlation Between CECO Environmental and Sharc International
Can any of the company-specific risk be diversified away by investing in both CECO Environmental and Sharc International 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 CECO Environmental and Sharc International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CECO Environmental Corp and Sharc International Systems, you can compare the effects of market volatilities on CECO Environmental and Sharc International 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 CECO Environmental with a short position of Sharc International. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and Sharc International.
Diversification Opportunities for CECO Environmental and Sharc International
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CECO and Sharc is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Sharc International Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sharc International and CECO Environmental 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 CECO Environmental Corp are associated (or correlated) with Sharc International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sharc International has no effect on the direction of CECO Environmental i.e., CECO Environmental and Sharc International go up and down completely randomly.
Pair Corralation between CECO Environmental and Sharc International
Assuming the 90 days horizon CECO Environmental Corp is expected to generate 0.33 times more return on investment than Sharc International. However, CECO Environmental Corp is 2.99 times less risky than Sharc International. It trades about -0.15 of its potential returns per unit of risk. Sharc International Systems is currently generating about -0.05 per unit of risk. If you would invest 3,038 in CECO Environmental Corp on December 4, 2024 and sell it today you would lose (680.00) from holding CECO Environmental Corp or give up 22.38% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.33% |
Values | Daily Returns |
CECO Environmental Corp vs. Sharc International Systems
Performance |
Timeline |
CECO Environmental Corp |
Sharc International |
CECO Environmental and Sharc International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CECO Environmental and Sharc International
The main advantage of trading using opposite CECO Environmental and Sharc International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, Sharc International 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 Sharc International will offset losses from the drop in Sharc International's long position.The idea behind CECO Environmental Corp and Sharc International Systems 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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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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