Correlation Between CECO ENVIRONMENTAL and LPKF Laser

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

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

Diversification Opportunities for CECO ENVIRONMENTAL and LPKF Laser

0.5

Correlation Coefficient

CECO ENVIRONMENTAL  LPKF Laser

Very weak diversification

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

Pair Corralation between CECO ENVIRONMENTAL and LPKF Laser

Assuming the 90 days trading horizon CECO ENVIRONMENTAL is expected to under-perform the LPKF Laser. In addition to that, CECO ENVIRONMENTAL is 1.35 times more volatile than LPKF Laser Electronics. It trades about -0.08 of its total potential returns per unit of risk. LPKF Laser Electronics is currently generating about -0.02 per unit of volatility. If you would invest  891.00  in LPKF Laser Electronics on December 28, 2024 and sell it today you would lose (40.00) from holding LPKF Laser Electronics or give up 4.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

CECO ENVIRONMENTAL  vs.  LPKF Laser Electronics

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.

LPKF Laser Electronics

Risk-Adjusted Performance

Very Weak

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

Pair Trading with CECO ENVIRONMENTAL and LPKF Laser

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

The idea behind CECO ENVIRONMENTAL and LPKF Laser Electronics 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.