Correlation Between GMS and CECO Environmental
Can any of the company-specific risk be diversified away by investing in both GMS and CECO Environmental 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 GMS and CECO Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and CECO Environmental Corp, you can compare the effects of market volatilities on GMS and CECO Environmental 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 GMS with a short position of CECO Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and CECO Environmental.
Diversification Opportunities for GMS and CECO Environmental
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GMS and CECO is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and CECO Environmental Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO Environmental Corp and GMS 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 GMS Inc are associated (or correlated) with CECO Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CECO Environmental Corp has no effect on the direction of GMS i.e., GMS and CECO Environmental go up and down completely randomly.
Pair Corralation between GMS and CECO Environmental
Considering the 90-day investment horizon GMS Inc is expected to under-perform the CECO Environmental. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 1.43 times less risky than CECO Environmental. The stock trades about -0.24 of its potential returns per unit of risk. The CECO Environmental Corp is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 2,511 in CECO Environmental Corp on September 13, 2024 and sell it today you would earn a total of 761.00 from holding CECO Environmental Corp or generate 30.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. CECO Environmental Corp
Performance |
| Timeline |
| GMS Inc |
| CECO Environmental Corp |
GMS and CECO Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and CECO Environmental
The main advantage of trading using opposite GMS and CECO Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, CECO Environmental 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 CECO Environmental will offset losses from the drop in CECO Environmental's long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| CECO Environmental vs. Federal Signal | CECO Environmental vs. Zurn Elkay Water | CECO Environmental vs. Fuel Tech | CECO Environmental vs. Energy Recovery |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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