Correlation Between CECO Environmental and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both CECO Environmental and Emerson Electric 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 Emerson Electric 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 Emerson Electric, you can compare the effects of market volatilities on CECO Environmental and Emerson Electric 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 Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and Emerson Electric.
Diversification Opportunities for CECO Environmental and Emerson Electric
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between CECO and Emerson is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric 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 Emerson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Electric has no effect on the direction of CECO Environmental i.e., CECO Environmental and Emerson Electric go up and down completely randomly.
Pair Corralation between CECO Environmental and Emerson Electric
Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 2.01 times more return on investment than Emerson Electric. However, CECO Environmental is 2.01 times more volatile than Emerson Electric. It trades about 0.08 of its potential returns per unit of risk. Emerson Electric is currently generating about 0.06 per unit of risk. If you would invest 1,180 in CECO Environmental Corp on August 28, 2024 and sell it today you would earn a total of 2,064 from holding CECO Environmental Corp or generate 174.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CECO Environmental Corp vs. Emerson Electric
Performance |
| Timeline |
| CECO Environmental Corp |
| Emerson Electric |
CECO Environmental and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO Environmental and Emerson Electric
The main advantage of trading using opposite CECO Environmental and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, Emerson Electric 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 Emerson Electric will offset losses from the drop in Emerson Electric's long position.| CECO Environmental vs. Federal Signal | CECO Environmental vs. Zurn Elkay Water | CECO Environmental vs. Fuel Tech | CECO Environmental vs. Energy Recovery |
| Emerson Electric vs. Graco Inc | Emerson Electric vs. Franklin Electric Co | Emerson Electric vs. Flowserve | Emerson Electric vs. Donaldson |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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