Correlation Between CECO Environmental and Kontoor Brands
Can any of the company-specific risk be diversified away by investing in both CECO Environmental and Kontoor Brands 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 Kontoor Brands 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 Kontoor Brands, you can compare the effects of market volatilities on CECO Environmental and Kontoor Brands 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 Kontoor Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and Kontoor Brands.
Diversification Opportunities for CECO Environmental and Kontoor Brands
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CECO and Kontoor is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor Brands 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 Kontoor Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kontoor Brands has no effect on the direction of CECO Environmental i.e., CECO Environmental and Kontoor Brands go up and down completely randomly.
Pair Corralation between CECO Environmental and Kontoor Brands
Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 1.32 times more return on investment than Kontoor Brands. However, CECO Environmental is 1.32 times more volatile than Kontoor Brands. It trades about 0.08 of its potential returns per unit of risk. Kontoor Brands is currently generating about 0.09 per unit of risk. If you would invest 1,226 in CECO Environmental Corp on September 5, 2024 and sell it today you would earn a total of 2,001 from holding CECO Environmental Corp or generate 163.21% 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. Kontoor Brands
Performance |
| Timeline |
| CECO Environmental Corp |
| Kontoor Brands |
CECO Environmental and Kontoor Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO Environmental and Kontoor Brands
The main advantage of trading using opposite CECO Environmental and Kontoor Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, Kontoor Brands 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 Kontoor Brands will offset losses from the drop in Kontoor Brands' long position.| CECO Environmental vs. Federal Signal | CECO Environmental vs. Zurn Elkay Water | CECO Environmental vs. Fuel Tech | CECO Environmental vs. Energy Recovery |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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