Correlation Between Old Dominion and CECO Environmental
Can any of the company-specific risk be diversified away by investing in both Old Dominion 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 Old Dominion and CECO Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old Dominion Freight and CECO Environmental Corp, you can compare the effects of market volatilities on Old Dominion 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 Old Dominion with a short position of CECO Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Dominion and CECO Environmental.
Diversification Opportunities for Old Dominion and CECO Environmental
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Old and CECO is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight 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 Old Dominion 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 Old Dominion Freight 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 Old Dominion i.e., Old Dominion and CECO Environmental go up and down completely randomly.
Pair Corralation between Old Dominion and CECO Environmental
Given the investment horizon of 90 days Old Dominion is expected to generate 2.26 times less return on investment than CECO Environmental. But when comparing it to its historical volatility, Old Dominion Freight is 1.49 times less risky than CECO Environmental. It trades about 0.05 of its potential returns per unit of risk. CECO Environmental Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,184 in CECO Environmental Corp on August 24, 2024 and sell it today you would earn a total of 1,952 from holding CECO Environmental Corp or generate 164.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Old Dominion Freight vs. CECO Environmental Corp
Performance |
| Timeline |
| Old Dominion Freight |
| CECO Environmental Corp |
Old Dominion and CECO Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Old Dominion and CECO Environmental
The main advantage of trading using opposite Old Dominion and CECO Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Dominion 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.| Old Dominion vs. ArcBest Corp | Old Dominion vs. Marten Transport | Old Dominion vs. Werner Enterprises | Old Dominion vs. Knight Transportation |
| CECO Environmental vs. China Natural Resources | CECO Environmental vs. Seychelle Environmtl | CECO Environmental vs. Vow ASA | CECO Environmental vs. Eestech |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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