Correlation Between CECO ENVIRONMENTAL and INFORMATION SVC

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

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

Diversification Opportunities for CECO ENVIRONMENTAL and INFORMATION SVC

0.02

Correlation Coefficient

CECO ENVIRONMENTAL  INFORMATION SVC

Significant diversification

The 3 months correlation between CECO and INFORMATION is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding CECO ENVIRONMENTAL and INFORMATION SVC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INFORMATION SVC GRP 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 INFORMATION SVC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INFORMATION SVC GRP has no effect on the direction of CECO ENVIRONMENTAL i.e., CECO ENVIRONMENTAL and INFORMATION SVC go up and down completely randomly.

Pair Corralation between CECO ENVIRONMENTAL and INFORMATION SVC

Assuming the 90 days trading horizon CECO ENVIRONMENTAL is expected to under-perform the INFORMATION SVC. In addition to that, CECO ENVIRONMENTAL is 1.48 times more volatile than INFORMATION SVC GRP. It trades about -0.08 of its total potential returns per unit of risk. INFORMATION SVC GRP is currently generating about 0.06 per unit of volatility. If you would invest  316.00  in INFORMATION SVC GRP on December 30, 2024 and sell it today you would earn a total of  26.00  from holding INFORMATION SVC GRP or generate 8.23% return on investment over 90 days.

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

CECO ENVIRONMENTAL  vs.  INFORMATION SVC GRP

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.

INFORMATION SVC GRP

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INFORMATION SVC GRP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, INFORMATION SVC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CECO ENVIRONMENTAL and INFORMATION SVC

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

The idea behind CECO ENVIRONMENTAL and INFORMATION SVC GRP 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.