Correlation Between Urban Gro and CEA Industries
Can any of the company-specific risk be diversified away by investing in both Urban Gro and CEA Industries 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 Urban Gro and CEA Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Urban Gro and CEA Industries, you can compare the effects of market volatilities on Urban Gro and CEA Industries 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 Urban Gro with a short position of CEA Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Urban Gro and CEA Industries.
Diversification Opportunities for Urban Gro and CEA Industries
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Urban and CEA is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Urban Gro and CEA Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEA Industries and Urban Gro 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 Urban Gro are associated (or correlated) with CEA Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEA Industries has no effect on the direction of Urban Gro i.e., Urban Gro and CEA Industries go up and down completely randomly.
Pair Corralation between Urban Gro and CEA Industries
Given the investment horizon of 90 days Urban Gro is expected to under-perform the CEA Industries. But the stock apears to be less risky and, when comparing its historical volatility, Urban Gro is 1.12 times less risky than CEA Industries. The stock trades about -0.2 of its potential returns per unit of risk. The CEA Industries is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 760.00 in CEA Industries on November 18, 2024 and sell it today you would earn a total of 340.00 from holding CEA Industries or generate 44.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Urban Gro vs. CEA Industries
Performance |
| Timeline |
| Urban Gro |
| CEA Industries |
Urban Gro and CEA Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Urban Gro and CEA Industries
The main advantage of trading using opposite Urban Gro and CEA Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Urban Gro position performs unexpectedly, CEA Industries 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 CEA Industries will offset losses from the drop in CEA Industries' long position.| Urban Gro vs. CEA Industries | Urban Gro vs. Titan International | Urban Gro vs. Volvo AB ADR | Urban Gro vs. Gencor Industries |
| CEA Industries vs. Rev Group | CEA Industries vs. Caterpillar | CEA Industries vs. Buhler Industries | CEA Industries vs. Austin Engineering Limited |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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