Correlation Between CECO Environmental and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both CECO Environmental and Pentair PLC 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 Pentair PLC 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 Pentair PLC, you can compare the effects of market volatilities on CECO Environmental and Pentair PLC 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 Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and Pentair PLC.
Diversification Opportunities for CECO Environmental and Pentair PLC
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between CECO and Pentair is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC 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 Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of CECO Environmental i.e., CECO Environmental and Pentair PLC go up and down completely randomly.
Pair Corralation between CECO Environmental and Pentair PLC
Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 1.84 times more return on investment than Pentair PLC. However, CECO Environmental is 1.84 times more volatile than Pentair PLC. It trades about 0.08 of its potential returns per unit of risk. Pentair PLC is currently generating about 0.12 per unit of risk. If you would invest 1,219 in CECO Environmental Corp on August 30, 2024 and sell it today you would earn a total of 1,969 from holding CECO Environmental Corp or generate 161.53% 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. Pentair PLC
Performance |
| Timeline |
| CECO Environmental Corp |
| Pentair PLC |
CECO Environmental and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO Environmental and Pentair PLC
The main advantage of trading using opposite CECO Environmental and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, Pentair PLC 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 Pentair PLC will offset losses from the drop in Pentair PLC's 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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