Correlation Between CECO ENVIRONMENTAL and DiamondRock Hospitality
Can any of the company-specific risk be diversified away by investing in both CECO ENVIRONMENTAL and DiamondRock Hospitality 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 DiamondRock Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CECO ENVIRONMENTAL and DiamondRock Hospitality, you can compare the effects of market volatilities on CECO ENVIRONMENTAL and DiamondRock Hospitality 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 DiamondRock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO ENVIRONMENTAL and DiamondRock Hospitality.
Diversification Opportunities for CECO ENVIRONMENTAL and DiamondRock Hospitality
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CECO and DiamondRock is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CECO ENVIRONMENTAL and DiamondRock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiamondRock Hospitality 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 DiamondRock Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DiamondRock Hospitality has no effect on the direction of CECO ENVIRONMENTAL i.e., CECO ENVIRONMENTAL and DiamondRock Hospitality go up and down completely randomly.
Pair Corralation between CECO ENVIRONMENTAL and DiamondRock Hospitality
Assuming the 90 days trading horizon CECO ENVIRONMENTAL is expected to generate 0.89 times more return on investment than DiamondRock Hospitality. However, CECO ENVIRONMENTAL is 1.12 times less risky than DiamondRock Hospitality. It trades about 0.09 of its potential returns per unit of risk. DiamondRock Hospitality is currently generating about 0.04 per unit of risk. If you would invest 2,220 in CECO ENVIRONMENTAL on September 2, 2024 and sell it today you would earn a total of 778.00 from holding CECO ENVIRONMENTAL or generate 35.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CECO ENVIRONMENTAL vs. DiamondRock Hospitality
Performance |
| Timeline |
| CECO ENVIRONMENTAL |
| DiamondRock Hospitality |
CECO ENVIRONMENTAL and DiamondRock Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CECO ENVIRONMENTAL and DiamondRock Hospitality
The main advantage of trading using opposite CECO ENVIRONMENTAL and DiamondRock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO ENVIRONMENTAL position performs unexpectedly, DiamondRock Hospitality 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 DiamondRock Hospitality will offset losses from the drop in DiamondRock Hospitality's long position.| CECO ENVIRONMENTAL vs. Automatic Data Processing | CECO ENVIRONMENTAL vs. TIANDE CHEMICAL | CECO ENVIRONMENTAL vs. Soken Chemical Engineering | CECO ENVIRONMENTAL vs. Nucletron Electronic Aktiengesellschaft |
| DiamondRock Hospitality vs. Superior Plus Corp | DiamondRock Hospitality vs. NMI Holdings | DiamondRock Hospitality vs. Origin Agritech | DiamondRock Hospitality vs. SIVERS SEMICONDUCTORS AB |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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