Correlation Between Microsoft and CECO ENVIRONMENTAL
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and CECO ENVIRONMENTAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CECO ENVIRONMENTAL, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of CECO ENVIRONMENTAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CECO ENVIRONMENTAL.
Diversification Opportunities for Microsoft and CECO ENVIRONMENTAL
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and CECO is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and CECO ENVIRONMENTAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO ENVIRONMENTAL and Microsoft 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 Microsoft 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 has no effect on the direction of Microsoft i.e., Microsoft and CECO ENVIRONMENTAL go up and down completely randomly.
Pair Corralation between Microsoft and CECO ENVIRONMENTAL
Assuming the 90 days trading horizon Microsoft is expected to generate 9.4 times less return on investment than CECO ENVIRONMENTAL. But when comparing it to its historical volatility, Microsoft is 2.22 times less risky than CECO ENVIRONMENTAL. It trades about 0.02 of its potential returns per unit of risk. CECO ENVIRONMENTAL is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,860 in CECO ENVIRONMENTAL on November 8, 2024 and sell it today you would earn a total of 872.00 from holding CECO ENVIRONMENTAL or generate 46.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. CECO ENVIRONMENTAL
Performance |
| Timeline |
| Microsoft |
| CECO ENVIRONMENTAL |
Microsoft and CECO ENVIRONMENTAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and CECO ENVIRONMENTAL
The main advantage of trading using opposite Microsoft and CECO ENVIRONMENTAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Vulcan Materials | Microsoft vs. Heidelberg Materials AG | Microsoft vs. Verizon Communications | Microsoft vs. T MOBILE INCDL 00001 |
| CECO ENVIRONMENTAL vs. Apple Inc | CECO ENVIRONMENTAL vs. Apple Inc | CECO ENVIRONMENTAL vs. Apple Inc | CECO ENVIRONMENTAL vs. Apple Inc |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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