Correlation Between XBP Europe and CECO Environmental

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

By analyzing existing cross correlation between XBP Europe Holdings and CECO Environmental Corp, you can compare the effects of market volatilities on XBP Europe and CECO Environmental 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 XBP Europe with a short position of CECO Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of XBP Europe and CECO Environmental.

Diversification Opportunities for XBP Europe and CECO Environmental

0.21

Correlation Coefficient

XBP Europe  CECO Environmental

Modest diversification

The 3 months correlation between XBP and CECO is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding XBP Europe Holdings and CECO Environmental Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO Environmental Corp and XBP Europe 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 XBP Europe Holdings are associated (or correlated) with CECO Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CECO Environmental Corp has no effect on the direction of XBP Europe i.e., XBP Europe and CECO Environmental go up and down completely randomly.

Pair Corralation between XBP Europe and CECO Environmental

Considering the 90-day investment horizon XBP Europe Holdings is expected to under-perform the CECO Environmental. In addition to that, XBP Europe is 1.47 times more volatile than CECO Environmental Corp. It trades about -0.19 of its total potential returns per unit of risk. CECO Environmental Corp is currently generating about -0.03 per unit of volatility. If you would invest  3,020  in CECO Environmental Corp on September 22, 2024 and sell it today you would lose (71.00) from holding CECO Environmental Corp or give up 2.35% of portfolio value over 90 days.

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

XBP Europe Holdings  vs.  CECO Environmental Corp

XBP Europe Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XBP Europe Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental drivers, XBP Europe reported solid returns over the last few months and may actually be approaching a breakup point.

CECO Environmental Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, CECO Environmental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with XBP Europe and CECO Environmental

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

The idea behind XBP Europe Holdings and CECO Environmental Corp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.