Correlation Between CECO Environmental and Starbucks
Can any of the company-specific risk be diversified away by investing in both CECO Environmental and Starbucks 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 Starbucks 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 Starbucks, you can compare the effects of market volatilities on CECO Environmental and Starbucks 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 Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and Starbucks.
Diversification Opportunities for CECO Environmental and Starbucks
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between CECO and Starbucks is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks 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 Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of CECO Environmental i.e., CECO Environmental and Starbucks go up and down completely randomly.
Pair Corralation between CECO Environmental and Starbucks
Given the investment horizon of 90 days CECO Environmental is expected to generate 4.2 times less return on investment than Starbucks. In addition to that, CECO Environmental is 1.19 times more volatile than Starbucks. It trades about 0.02 of its total potential returns per unit of risk. Starbucks is currently generating about 0.1 per unit of volatility. If you would invest 7,429 in Starbucks on October 26, 2024 and sell it today you would earn a total of 2,370 from holding Starbucks or generate 31.9% 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. Starbucks
Performance |
| Timeline |
| CECO Environmental Corp |
| Starbucks |
CECO Environmental and Starbucks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO Environmental and Starbucks
The main advantage of trading using opposite CECO Environmental and Starbucks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, Starbucks 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 Starbucks will offset losses from the drop in Starbucks' long position.| CECO Environmental vs. Federal Signal | CECO Environmental vs. Zurn Elkay Water | CECO Environmental vs. Fuel Tech | CECO Environmental vs. Energy Recovery |
| Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza Common | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
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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