Correlation Between CECO Environmental and American Hotel
Can any of the company-specific risk be diversified away by investing in both CECO Environmental and American Hotel 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 American Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CECO Environmental Corp and American Hotel Income, you can compare the effects of market volatilities on CECO Environmental and American Hotel 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 American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and American Hotel.
Diversification Opportunities for CECO Environmental and American Hotel
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CECO and American is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income 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 Corp are associated (or correlated) with American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of CECO Environmental i.e., CECO Environmental and American Hotel go up and down completely randomly.
Pair Corralation between CECO Environmental and American Hotel
Given the investment horizon of 90 days CECO Environmental is expected to generate 6.05 times less return on investment than American Hotel. But when comparing it to its historical volatility, CECO Environmental Corp is 1.49 times less risky than American Hotel. It trades about 0.02 of its potential returns per unit of risk. American Hotel Income is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 34.00 in American Hotel Income on October 26, 2024 and sell it today you would earn a total of 13.00 from holding American Hotel Income or generate 38.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CECO Environmental Corp vs. American Hotel Income
Performance |
| Timeline |
| CECO Environmental Corp |
| American Hotel Income |
CECO Environmental and American Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO Environmental and American Hotel
The main advantage of trading using opposite CECO Environmental and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, American Hotel 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 American Hotel will offset losses from the drop in American Hotel's long position.| CECO Environmental vs. Federal Signal | CECO Environmental vs. Zurn Elkay Water | CECO Environmental vs. Fuel Tech | CECO Environmental vs. Energy Recovery |
| American Hotel vs. Ashford Hospitality Trust | American Hotel vs. Ashford Hospitality Trust | American Hotel vs. Braemar Hotels Resorts | American Hotel vs. Braemar Hotels Resorts |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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