Correlation Between CECO Environmental and Fuel Tech
Can any of the company-specific risk be diversified away by investing in both CECO Environmental and Fuel Tech 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 Fuel Tech 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 Fuel Tech, you can compare the effects of market volatilities on CECO Environmental and Fuel Tech 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 Fuel Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and Fuel Tech.
Diversification Opportunities for CECO Environmental and Fuel Tech
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CECO and Fuel is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Fuel Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuel Tech 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 Fuel Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuel Tech has no effect on the direction of CECO Environmental i.e., CECO Environmental and Fuel Tech go up and down completely randomly.
Pair Corralation between CECO Environmental and Fuel Tech
Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 1.08 times more return on investment than Fuel Tech. However, CECO Environmental is 1.08 times more volatile than Fuel Tech. It trades about 0.07 of its potential returns per unit of risk. Fuel Tech is currently generating about 0.0 per unit of risk. If you would invest 1,220 in CECO Environmental Corp on August 23, 2024 and sell it today you would earn a total of 1,800 from holding CECO Environmental Corp or generate 147.54% 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. Fuel Tech
Performance |
| Timeline |
| CECO Environmental Corp |
| Fuel Tech |
CECO Environmental and Fuel Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO Environmental and Fuel Tech
The main advantage of trading using opposite CECO Environmental and Fuel Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, Fuel Tech 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 Fuel Tech will offset losses from the drop in Fuel Tech's long position.| CECO Environmental vs. Federal Signal | CECO Environmental vs. Zurn Elkay Water | CECO Environmental vs. Energy Recovery | CECO Environmental vs. 374Water Common Stock |
| Fuel Tech vs. Federal Signal | Fuel Tech vs. Zurn Elkay Water | Fuel Tech vs. Energy Recovery | Fuel Tech vs. 374Water Common Stock |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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