Correlation Between CECO Environmental and KNOT Offshore
Can any of the company-specific risk be diversified away by investing in both CECO Environmental and KNOT Offshore 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 KNOT Offshore 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 KNOT Offshore Partners, you can compare the effects of market volatilities on CECO Environmental and KNOT Offshore 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 KNOT Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and KNOT Offshore.
Diversification Opportunities for CECO Environmental and KNOT Offshore
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CECO and KNOT is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and KNOT Offshore Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNOT Offshore Partners 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 KNOT Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNOT Offshore Partners has no effect on the direction of CECO Environmental i.e., CECO Environmental and KNOT Offshore go up and down completely randomly.
Pair Corralation between CECO Environmental and KNOT Offshore
Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 1.13 times more return on investment than KNOT Offshore. However, CECO Environmental is 1.13 times more volatile than KNOT Offshore Partners. It trades about 0.07 of its potential returns per unit of risk. KNOT Offshore Partners is currently generating about 0.01 per unit of risk. If you would invest 1,439 in CECO Environmental Corp on August 27, 2024 and sell it today you would earn a total of 1,697 from holding CECO Environmental Corp or generate 117.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CECO Environmental Corp vs. KNOT Offshore Partners
Performance |
| Timeline |
| CECO Environmental Corp |
| KNOT Offshore Partners |
CECO Environmental and KNOT Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO Environmental and KNOT Offshore
The main advantage of trading using opposite CECO Environmental and KNOT Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, KNOT Offshore 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 KNOT Offshore will offset losses from the drop in KNOT Offshore's long position.| CECO Environmental vs. Federal Signal | CECO Environmental vs. Zurn Elkay Water | CECO Environmental vs. Fuel Tech | CECO Environmental vs. 374Water Common Stock |
| KNOT Offshore vs. USA Compression Partners | KNOT Offshore vs. Dynagas LNG Partners | KNOT Offshore vs. Crossamerica Partners LP | KNOT Offshore vs. Delek Logistics Partners |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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