Correlation Between CECO ENVIRONMENTAL and Lamar Advertising
Can any of the company-specific risk be diversified away by investing in both CECO ENVIRONMENTAL and Lamar Advertising 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 CECO ENVIRONMENTAL and Lamar Advertising into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CECO ENVIRONMENTAL and Lamar Advertising, you can compare the effects of market volatilities on CECO ENVIRONMENTAL and Lamar Advertising 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 CECO ENVIRONMENTAL with a short position of Lamar Advertising. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO ENVIRONMENTAL and Lamar Advertising.
Diversification Opportunities for CECO ENVIRONMENTAL and Lamar Advertising
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between CECO and Lamar is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding CECO ENVIRONMENTAL and Lamar Advertising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamar Advertising and CECO ENVIRONMENTAL 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 CECO ENVIRONMENTAL are associated (or correlated) with Lamar Advertising. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamar Advertising has no effect on the direction of CECO ENVIRONMENTAL i.e., CECO ENVIRONMENTAL and Lamar Advertising go up and down completely randomly.
Pair Corralation between CECO ENVIRONMENTAL and Lamar Advertising
Assuming the 90 days trading horizon CECO ENVIRONMENTAL is expected to generate 1.89 times more return on investment than Lamar Advertising. However, CECO ENVIRONMENTAL is 1.89 times more volatile than Lamar Advertising. It trades about 0.11 of its potential returns per unit of risk. Lamar Advertising is currently generating about 0.1 per unit of risk. If you would invest 1,280 in CECO ENVIRONMENTAL on August 29, 2024 and sell it today you would earn a total of 1,734 from holding CECO ENVIRONMENTAL or generate 135.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CECO ENVIRONMENTAL vs. Lamar Advertising
Performance |
| Timeline |
| CECO ENVIRONMENTAL |
| Lamar Advertising |
CECO ENVIRONMENTAL and Lamar Advertising Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO ENVIRONMENTAL and Lamar Advertising
The main advantage of trading using opposite CECO ENVIRONMENTAL and Lamar Advertising positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO ENVIRONMENTAL position performs unexpectedly, Lamar Advertising 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 Lamar Advertising will offset losses from the drop in Lamar Advertising's long position.| CECO ENVIRONMENTAL vs. Apple Inc | CECO ENVIRONMENTAL vs. Apple Inc | CECO ENVIRONMENTAL vs. Superior Plus Corp | CECO ENVIRONMENTAL vs. SIVERS SEMICONDUCTORS AB |
| Lamar Advertising vs. Apple Inc | Lamar Advertising vs. Apple Inc | Lamar Advertising vs. Apple Inc | Lamar Advertising 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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