Correlation Between CECO ENVIRONMENTAL and Humana

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

By analyzing existing cross correlation between CECO ENVIRONMENTAL and Humana Inc, you can compare the effects of market volatilities on CECO ENVIRONMENTAL and Humana 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 Humana. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO ENVIRONMENTAL and Humana.

Diversification Opportunities for CECO ENVIRONMENTAL and Humana

0.5

Correlation Coefficient

CECO ENVIRONMENTAL  Humana

Very weak diversification

The 3 months correlation between CECO and Humana is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding CECO ENVIRONMENTAL and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc 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 Humana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humana Inc has no effect on the direction of CECO ENVIRONMENTAL i.e., CECO ENVIRONMENTAL and Humana go up and down completely randomly.

Pair Corralation between CECO ENVIRONMENTAL and Humana

Assuming the 90 days trading horizon CECO ENVIRONMENTAL is expected to generate 1.19 times more return on investment than Humana. However, CECO ENVIRONMENTAL is 1.19 times more volatile than Humana Inc. It trades about 0.38 of its potential returns per unit of risk. Humana Inc is currently generating about -0.1 per unit of risk. If you would invest  2,452  in CECO ENVIRONMENTAL on September 15, 2024 and sell it today you would earn a total of  610.00  from holding CECO ENVIRONMENTAL or generate 24.88% return on investment over 90 days.

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

CECO ENVIRONMENTAL  vs.  Humana Inc

CECO ENVIRONMENTAL

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CECO ENVIRONMENTAL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CECO ENVIRONMENTAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Humana Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Humana Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Humana is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CECO ENVIRONMENTAL and Humana

The main advantage of trading using opposite CECO ENVIRONMENTAL and Humana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO ENVIRONMENTAL position performs unexpectedly, Humana 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 Humana will offset losses from the drop in Humana's long position.

The idea behind CECO ENVIRONMENTAL and Humana Inc 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .