Correlation Between CECO Environmental and Balchem
Can any of the company-specific risk be diversified away by investing in both CECO Environmental and Balchem 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 Balchem 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 Balchem, you can compare the effects of market volatilities on CECO Environmental and Balchem 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 Balchem. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and Balchem.
Diversification Opportunities for CECO Environmental and Balchem
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CECO and Balchem is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem 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 Balchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balchem has no effect on the direction of CECO Environmental i.e., CECO Environmental and Balchem go up and down completely randomly.
Pair Corralation between CECO Environmental and Balchem
Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 3.04 times more return on investment than Balchem. However, CECO Environmental is 3.04 times more volatile than Balchem. It trades about 0.24 of its potential returns per unit of risk. Balchem is currently generating about 0.2 per unit of risk. If you would invest 2,631 in CECO Environmental Corp on August 28, 2024 and sell it today you would earn a total of 668.00 from holding CECO Environmental Corp or generate 25.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CECO Environmental Corp vs. Balchem
Performance |
| Timeline |
| CECO Environmental Corp |
| Balchem |
CECO Environmental and Balchem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO Environmental and Balchem
The main advantage of trading using opposite CECO Environmental and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, Balchem 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 Balchem will offset losses from the drop in Balchem's long position.| CECO Environmental vs. Federal Signal | CECO Environmental vs. Zurn Elkay Water | CECO Environmental vs. Fuel Tech | CECO Environmental vs. CO2 Solutions |
| Balchem vs. Sensient Technologies | Balchem vs. Innospec | Balchem vs. Minerals Technologies | Balchem vs. Oil Dri |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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