Correlation Between CECO Environmental and Park Ohio
Can any of the company-specific risk be diversified away by investing in both CECO Environmental and Park Ohio 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 Park Ohio 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 Park Ohio Holdings, you can compare the effects of market volatilities on CECO Environmental and Park Ohio 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 Park Ohio. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and Park Ohio.
Diversification Opportunities for CECO Environmental and Park Ohio
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CECO and Park is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Park Ohio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Ohio Holdings 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 Park Ohio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Ohio Holdings has no effect on the direction of CECO Environmental i.e., CECO Environmental and Park Ohio go up and down completely randomly.
Pair Corralation between CECO Environmental and Park Ohio
Given the investment horizon of 90 days CECO Environmental is expected to generate 1.07 times less return on investment than Park Ohio. In addition to that, CECO Environmental is 1.09 times more volatile than Park Ohio Holdings. It trades about 0.07 of its total potential returns per unit of risk. Park Ohio Holdings is currently generating about 0.08 per unit of volatility. If you would invest 1,369 in Park Ohio Holdings on August 27, 2024 and sell it today you would earn a total of 1,944 from holding Park Ohio Holdings or generate 142.0% 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. Park Ohio Holdings
Performance |
| Timeline |
| CECO Environmental Corp |
| Park Ohio Holdings |
CECO Environmental and Park Ohio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO Environmental and Park Ohio
The main advantage of trading using opposite CECO Environmental and Park Ohio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, Park Ohio 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 Park Ohio will offset losses from the drop in Park Ohio'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 |
| Park Ohio vs. Aquagold International | Park Ohio vs. Morningstar Unconstrained Allocation | Park Ohio vs. High Yield Municipal Fund | Park Ohio vs. Thrivent High Yield |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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