Correlation Between CECO Environmental and EMCOR
Can any of the company-specific risk be diversified away by investing in both CECO Environmental and EMCOR 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 EMCOR 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 EMCOR Group, you can compare the effects of market volatilities on CECO Environmental and EMCOR 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 EMCOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and EMCOR.
Diversification Opportunities for CECO Environmental and EMCOR
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CECO and EMCOR is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group 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 EMCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCOR Group has no effect on the direction of CECO Environmental i.e., CECO Environmental and EMCOR go up and down completely randomly.
Pair Corralation between CECO Environmental and EMCOR
Given the investment horizon of 90 days CECO Environmental Corp is expected to under-perform the EMCOR. But the stock apears to be less risky and, when comparing its historical volatility, CECO Environmental Corp is 1.64 times less risky than EMCOR. The stock trades about -0.16 of its potential returns per unit of risk. The EMCOR Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 45,740 in EMCOR Group on November 3, 2024 and sell it today you would lose (934.00) from holding EMCOR Group or give up 2.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CECO Environmental Corp vs. EMCOR Group
Performance |
| Timeline |
| CECO Environmental Corp |
| EMCOR Group |
CECO Environmental and EMCOR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO Environmental and EMCOR
The main advantage of trading using opposite CECO Environmental and EMCOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, EMCOR 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 EMCOR will offset losses from the drop in EMCOR's long position.| CECO Environmental vs. Federal Signal | CECO Environmental vs. Zurn Elkay Water | CECO Environmental vs. Fuel Tech | CECO Environmental vs. Energy Recovery |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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