Correlation Between CECO Environmental and Primo Brands
Can any of the company-specific risk be diversified away by investing in both CECO Environmental and Primo 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 Primo 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 Primo Brands, you can compare the effects of market volatilities on CECO Environmental and Primo 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 Primo Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and Primo Brands.
Diversification Opportunities for CECO Environmental and Primo Brands
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CECO and Primo is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Primo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primo 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 Primo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primo Brands has no effect on the direction of CECO Environmental i.e., CECO Environmental and Primo Brands go up and down completely randomly.
Pair Corralation between CECO Environmental and Primo Brands
Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 1.86 times more return on investment than Primo Brands. However, CECO Environmental is 1.86 times more volatile than Primo Brands. It trades about 0.07 of its potential returns per unit of risk. Primo Brands is currently generating about 0.1 per unit of risk. If you would invest 1,385 in CECO Environmental Corp on September 19, 2024 and sell it today you would earn a total of 1,735 from holding CECO Environmental Corp or generate 125.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CECO Environmental Corp vs. Primo Brands
Performance |
| Timeline |
| CECO Environmental Corp |
| Primo Brands |
CECO Environmental and Primo Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO Environmental and Primo Brands
The main advantage of trading using opposite CECO Environmental and Primo Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, Primo 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 Primo Brands will offset losses from the drop in Primo Brands' long position.| CECO Environmental vs. Zurn Elkay Water | CECO Environmental vs. Federal Signal | CECO Environmental vs. CO2 Solutions | CECO Environmental vs. Fuel Tech |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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