Correlation Between CECO ENVIRONMENTAL and GEO

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Can any of the company-specific risk be diversified away by investing in both CECO ENVIRONMENTAL and GEO 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 GEO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CECO ENVIRONMENTAL and The GEO Group, you can compare the effects of market volatilities on CECO ENVIRONMENTAL and GEO 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 GEO. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO ENVIRONMENTAL and GEO.

Diversification Opportunities for CECO ENVIRONMENTAL and GEO

0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between CECO and GEO is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding CECO ENVIRONMENTAL and The GEO Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEO Group 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 are associated (or correlated) with GEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEO Group has no effect on the direction of CECO ENVIRONMENTAL i.e., CECO ENVIRONMENTAL and GEO go up and down completely randomly.

Pair Corralation between CECO ENVIRONMENTAL and GEO

Assuming the 90 days trading horizon CECO ENVIRONMENTAL is expected to generate 0.88 times more return on investment than GEO. However, CECO ENVIRONMENTAL is 1.13 times less risky than GEO. It trades about 0.08 of its potential returns per unit of risk. The GEO Group is currently generating about 0.07 per unit of risk. If you would invest  1,150  in CECO ENVIRONMENTAL on September 4, 2024 and sell it today you would earn a total of  1,942  from holding CECO ENVIRONMENTAL or generate 168.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

CECO ENVIRONMENTAL  vs.  The GEO Group

 Performance 
       Timeline  
CECO ENVIRONMENTAL 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in CECO ENVIRONMENTAL are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, CECO ENVIRONMENTAL unveiled solid returns over the last few months and may actually be approaching a breakup point.
GEO Group 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in The GEO Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GEO reported solid returns over the last few months and may actually be approaching a breakup point.

CECO ENVIRONMENTAL and GEO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CECO ENVIRONMENTAL and GEO

The main advantage of trading using opposite CECO ENVIRONMENTAL and GEO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO ENVIRONMENTAL position performs unexpectedly, GEO 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 GEO will offset losses from the drop in GEO's long position.
The idea behind CECO ENVIRONMENTAL and The GEO Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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