Correlation Between SPORTING and CECO ENVIRONMENTAL
Can any of the company-specific risk be diversified away by investing in both SPORTING 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 SPORTING and CECO ENVIRONMENTAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPORTING and CECO ENVIRONMENTAL, you can compare the effects of market volatilities on SPORTING 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 SPORTING with a short position of CECO ENVIRONMENTAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPORTING and CECO ENVIRONMENTAL.
Diversification Opportunities for SPORTING and CECO ENVIRONMENTAL
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SPORTING and CECO is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding SPORTING and CECO ENVIRONMENTAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO ENVIRONMENTAL and SPORTING 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 SPORTING 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 SPORTING i.e., SPORTING and CECO ENVIRONMENTAL go up and down completely randomly.
Pair Corralation between SPORTING and CECO ENVIRONMENTAL
Assuming the 90 days trading horizon SPORTING is expected to under-perform the CECO ENVIRONMENTAL. But the stock apears to be less risky and, when comparing its historical volatility, SPORTING is 9.61 times less risky than CECO ENVIRONMENTAL. The stock trades about -0.27 of its potential returns per unit of risk. The CECO ENVIRONMENTAL is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,456 in CECO ENVIRONMENTAL on August 26, 2024 and sell it today you would earn a total of 482.00 from holding CECO ENVIRONMENTAL or generate 19.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPORTING vs. CECO ENVIRONMENTAL
Performance |
| Timeline |
| SPORTING |
| CECO ENVIRONMENTAL |
SPORTING and CECO ENVIRONMENTAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPORTING and CECO ENVIRONMENTAL
The main advantage of trading using opposite SPORTING and CECO ENVIRONMENTAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPORTING 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.The idea behind SPORTING and CECO ENVIRONMENTAL pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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