Correlation Between CECO ENVIRONMENTAL and GEO
Can any of the company-specific risk be diversified away by investing in both CECO ENVIRONMENTAL and GEO 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 GEO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CECO ENVIRONMENTAL and The GEO Group, you can compare the effects of market volatilities on CECO ENVIRONMENTAL and GEO 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 GEO. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO ENVIRONMENTAL and GEO.
Diversification Opportunities for CECO ENVIRONMENTAL and GEO
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CECO and GEO is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding CECO ENVIRONMENTAL and The GEO Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEO Group 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 GEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEO Group has no effect on the direction of CECO ENVIRONMENTAL i.e., CECO ENVIRONMENTAL and GEO go up and down completely randomly.
Pair Corralation between CECO ENVIRONMENTAL and GEO
Assuming the 90 days trading horizon CECO ENVIRONMENTAL is expected to generate 0.88 times more return on investment than GEO. However, CECO ENVIRONMENTAL is 1.13 times less risky than GEO. It trades about 0.08 of its potential returns per unit of risk. The GEO Group is currently generating about 0.07 per unit of risk. If you would invest 1,120 in CECO ENVIRONMENTAL on September 3, 2024 and sell it today you would earn a total of 1,878 from holding CECO ENVIRONMENTAL or generate 167.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CECO ENVIRONMENTAL vs. The GEO Group
Performance |
| Timeline |
| CECO ENVIRONMENTAL |
| GEO Group |
CECO ENVIRONMENTAL and GEO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO ENVIRONMENTAL and GEO
The main advantage of trading using opposite CECO ENVIRONMENTAL and GEO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO ENVIRONMENTAL position performs unexpectedly, GEO 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 GEO will offset losses from the drop in GEO's long position.| CECO ENVIRONMENTAL vs. TOTAL GABON | CECO ENVIRONMENTAL vs. Walgreens Boots Alliance | CECO ENVIRONMENTAL vs. Peak Resources Limited |
| GEO vs. COSMOSTEEL HLDGS | GEO vs. CECO ENVIRONMENTAL | GEO vs. TAL Education Group | GEO vs. Perma Fix Environmental Services |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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