Correlation Between CECO Environmental and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both CECO Environmental and ArcelorMittal 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 ArcelorMittal 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 ArcelorMittal SA ADR, you can compare the effects of market volatilities on CECO Environmental and ArcelorMittal 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 ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and ArcelorMittal.
Diversification Opportunities for CECO Environmental and ArcelorMittal
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between CECO and ArcelorMittal is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and ArcelorMittal SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA ADR 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA ADR has no effect on the direction of CECO Environmental i.e., CECO Environmental and ArcelorMittal go up and down completely randomly.
Pair Corralation between CECO Environmental and ArcelorMittal
Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 1.73 times more return on investment than ArcelorMittal. However, CECO Environmental is 1.73 times more volatile than ArcelorMittal SA ADR. It trades about 0.08 of its potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about -0.02 per unit of risk. If you would invest 2,028 in CECO Environmental Corp on August 25, 2024 and sell it today you would earn a total of 1,108 from holding CECO Environmental Corp or generate 54.64% 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. ArcelorMittal SA ADR
Performance |
| Timeline |
| CECO Environmental Corp |
| ArcelorMittal SA ADR |
CECO Environmental and ArcelorMittal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO Environmental and ArcelorMittal
The main advantage of trading using opposite CECO Environmental and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, ArcelorMittal 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 ArcelorMittal will offset losses from the drop in ArcelorMittal'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 |
| ArcelorMittal vs. Olympic Steel | ArcelorMittal vs. Ternium SA ADR | ArcelorMittal vs. Gerdau SA ADR | ArcelorMittal vs. POSCO Holdings |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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