Correlation Between Austin Engineering and CEA Industries
Can any of the company-specific risk be diversified away by investing in both Austin Engineering and CEA Industries 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 Austin Engineering and CEA Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Austin Engineering Limited and CEA Industries, you can compare the effects of market volatilities on Austin Engineering and CEA Industries 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 Austin Engineering with a short position of CEA Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austin Engineering and CEA Industries.
Diversification Opportunities for Austin Engineering and CEA Industries
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Austin and CEA is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Austin Engineering Limited and CEA Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEA Industries and Austin Engineering 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 Austin Engineering Limited are associated (or correlated) with CEA Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEA Industries has no effect on the direction of Austin Engineering i.e., Austin Engineering and CEA Industries go up and down completely randomly.
Pair Corralation between Austin Engineering and CEA Industries
Assuming the 90 days horizon Austin Engineering Limited is expected to generate 1.2 times more return on investment than CEA Industries. However, Austin Engineering is 1.2 times more volatile than CEA Industries. It trades about 0.06 of its potential returns per unit of risk. CEA Industries is currently generating about -0.01 per unit of risk. If you would invest 16.00 in Austin Engineering Limited on August 28, 2024 and sell it today you would earn a total of 14.00 from holding Austin Engineering Limited or generate 87.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
Austin Engineering Limited vs. CEA Industries
Performance |
| Timeline |
| Austin Engineering |
| CEA Industries |
Austin Engineering and CEA Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Austin Engineering and CEA Industries
The main advantage of trading using opposite Austin Engineering and CEA Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Austin Engineering position performs unexpectedly, CEA Industries 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 CEA Industries will offset losses from the drop in CEA Industries' long position.| Austin Engineering vs. American Premium Water | Austin Engineering vs. AmeraMex International | Austin Engineering vs. Arts Way Manufacturing Co | Austin Engineering vs. Astec Industries |
| CEA Industries vs. Rev Group | CEA Industries vs. Caterpillar | CEA Industries vs. Buhler Industries | CEA Industries vs. Austin Engineering Limited |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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