Correlation Between CECO Environmental and Parker Hannifin
Can any of the company-specific risk be diversified away by investing in both CECO Environmental and Parker Hannifin 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 Parker Hannifin 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 Parker Hannifin, you can compare the effects of market volatilities on CECO Environmental and Parker Hannifin 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 Parker Hannifin. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and Parker Hannifin.
Diversification Opportunities for CECO Environmental and Parker Hannifin
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CECO and Parker is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin 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 Parker Hannifin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parker Hannifin has no effect on the direction of CECO Environmental i.e., CECO Environmental and Parker Hannifin go up and down completely randomly.
Pair Corralation between CECO Environmental and Parker Hannifin
Given the investment horizon of 90 days CECO Environmental Corp is expected to under-perform the Parker Hannifin. But the stock apears to be less risky and, when comparing its historical volatility, CECO Environmental Corp is 1.38 times less risky than Parker Hannifin. The stock trades about -0.19 of its potential returns per unit of risk. The Parker Hannifin is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 61,314 in Parker Hannifin on January 11, 2025 and sell it today you would lose (5,296) from holding Parker Hannifin or give up 8.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CECO Environmental Corp vs. Parker Hannifin
Performance |
| Timeline |
| CECO Environmental Corp |
| Parker Hannifin |
CECO Environmental and Parker Hannifin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO Environmental and Parker Hannifin
The main advantage of trading using opposite CECO Environmental and Parker Hannifin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, Parker Hannifin 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 Parker Hannifin will offset losses from the drop in Parker Hannifin's long position.| CECO Environmental vs. Federal Signal | CECO Environmental vs. Zurn Elkay Water | CECO Environmental vs. Fuel Tech | CECO Environmental vs. Energy Recovery |
| Parker Hannifin vs. Babcock Wilcox Enterprises | Parker Hannifin vs. Crane Company | Parker Hannifin vs. Hillenbrand | Parker Hannifin vs. Ingersoll Rand |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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