Correlation Between CECO Environmental and RBC Bearings
Can any of the company-specific risk be diversified away by investing in both CECO Environmental and RBC Bearings 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 RBC Bearings 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 RBC Bearings Incorporated, you can compare the effects of market volatilities on CECO Environmental and RBC Bearings 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 RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and RBC Bearings.
Diversification Opportunities for CECO Environmental and RBC Bearings
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CECO and RBC is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings 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 RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of CECO Environmental i.e., CECO Environmental and RBC Bearings go up and down completely randomly.
Pair Corralation between CECO Environmental and RBC Bearings
Given the investment horizon of 90 days CECO Environmental is expected to generate 1.32 times less return on investment than RBC Bearings. In addition to that, CECO Environmental is 2.03 times more volatile than RBC Bearings Incorporated. It trades about 0.02 of its total potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.05 per unit of volatility. If you would invest 29,007 in RBC Bearings Incorporated on October 26, 2024 and sell it today you would earn a total of 2,602 from holding RBC Bearings Incorporated or generate 8.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.19% |
| Values | Daily Returns |
CECO Environmental Corp vs. RBC Bearings Incorporated
Performance |
| Timeline |
| CECO Environmental Corp |
| RBC Bearings |
CECO Environmental and RBC Bearings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO Environmental and RBC Bearings
The main advantage of trading using opposite CECO Environmental and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, RBC Bearings 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 RBC Bearings will offset losses from the drop in RBC Bearings' long position.| CECO Environmental vs. Federal Signal | CECO Environmental vs. Zurn Elkay Water | CECO Environmental vs. Fuel Tech | CECO Environmental vs. Energy Recovery |
| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Kennametal | RBC Bearings vs. Toro Co | RBC Bearings vs. Snap On |
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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