Correlation Between CECO Environmental and CDTi Advanced

Can any of the company-specific risk be diversified away by investing in both CECO Environmental and CDTi Advanced 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 CDTi Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CECO Environmental Corp and CDTi Advanced Materials, you can compare the effects of market volatilities on CECO Environmental and CDTi Advanced 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 CDTi Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and CDTi Advanced.

Diversification Opportunities for CECO Environmental and CDTi Advanced

-0.8

Correlation Coefficient

CECO Environmental  CDTi Advanced

Pay attention - limited upside

The 3 months correlation between CECO and CDTi is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and CDTi Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDTi Advanced Materials 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 Corp are associated (or correlated) with CDTi Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDTi Advanced Materials has no effect on the direction of CECO Environmental i.e., CECO Environmental and CDTi Advanced go up and down completely randomly.

Pair Corralation between CECO Environmental and CDTi Advanced

If you would invest  2,261  in CECO Environmental Corp on January 26, 2024 and sell it today you would earn a total of  166.00  from holding CECO Environmental Corp or generate 7.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

CECO Environmental Corp  vs.  CDTi Advanced Materials

CECO Environmental Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CECO Environmental Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, CECO Environmental displayed solid returns over the last few months and may actually be approaching a breakup point.

CDTi Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDTi Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CDTi Advanced is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CECO Environmental and CDTi Advanced

The main advantage of trading using opposite CECO Environmental and CDTi Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CECO Environmental position performs unexpectedly, CDTi Advanced 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 CDTi Advanced will offset losses from the drop in CDTi Advanced's long position.

The idea behind CECO Environmental Corp and CDTi Advanced Materials 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.