Correlation Between CECO Environmental and Zurn Elkay

Can any of the company-specific risk be diversified away by investing in both CECO Environmental and Zurn Elkay 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 Zurn Elkay 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 Zurn Elkay Water, you can compare the effects of market volatilities on CECO Environmental and Zurn Elkay 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 Zurn Elkay. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO Environmental and Zurn Elkay.

Diversification Opportunities for CECO Environmental and Zurn Elkay

-0.14

Correlation Coefficient

CECO Environmental  Zurn Elkay

Good diversification

The 3 months correlation between CECO and Zurn is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding CECO Environmental Corp and Zurn Elkay Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurn Elkay Water 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 Zurn Elkay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zurn Elkay Water has no effect on the direction of CECO Environmental i.e., CECO Environmental and Zurn Elkay go up and down completely randomly.

Pair Corralation between CECO Environmental and Zurn Elkay

Given the investment horizon of 90 days CECO Environmental Corp is expected to generate 1.91 times more return on investment than Zurn Elkay. However, CECO Environmental is 1.91 times more volatile than Zurn Elkay Water. It trades about 0.06 of its potential returns per unit of risk. Zurn Elkay Water is currently generating about 0.1 per unit of risk. If you would invest  1,310  in CECO Environmental Corp on August 3, 2024 and sell it today you would earn a total of  1,070  from holding CECO Environmental Corp or generate 81.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CECO Environmental Corp  vs.  Zurn Elkay Water

CECO Environmental Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CECO Environmental Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Zurn Elkay Water

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zurn Elkay Water are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Zurn Elkay unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CECO Environmental and Zurn Elkay

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

The idea behind CECO Environmental Corp and Zurn Elkay Water 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.

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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.