Correlation Between Amazon and CECO ENVIRONMENTAL
Can any of the company-specific risk be diversified away by investing in both Amazon 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 Amazon and CECO ENVIRONMENTAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and CECO ENVIRONMENTAL, you can compare the effects of market volatilities on Amazon 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 Amazon with a short position of CECO ENVIRONMENTAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and CECO ENVIRONMENTAL.
Diversification Opportunities for Amazon and CECO ENVIRONMENTAL
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Amazon and CECO is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and CECO ENVIRONMENTAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO ENVIRONMENTAL and Amazon 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 Amazon Inc 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 has no effect on the direction of Amazon i.e., Amazon and CECO ENVIRONMENTAL go up and down completely randomly.
Pair Corralation between Amazon and CECO ENVIRONMENTAL
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.56 times more return on investment than CECO ENVIRONMENTAL. However, Amazon Inc is 1.79 times less risky than CECO ENVIRONMENTAL. It trades about 0.11 of its potential returns per unit of risk. CECO ENVIRONMENTAL is currently generating about 0.05 per unit of risk. If you would invest 8,636 in Amazon Inc on November 21, 2024 and sell it today you would earn a total of 12,809 from holding Amazon Inc or generate 148.32% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 99.8% |
Values | Daily Returns |
Amazon Inc vs. CECO ENVIRONMENTAL
Performance |
Timeline |
Amazon Inc |
CECO ENVIRONMENTAL |
Amazon and CECO ENVIRONMENTAL Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Amazon and CECO ENVIRONMENTAL
The main advantage of trading using opposite Amazon and CECO ENVIRONMENTAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.Amazon vs. Scottish Mortgage Investment | ||
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Check out your portfolio center.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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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