Correlation Between CECO ENVIRONMENTAL and Sparta AG

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

By analyzing existing cross correlation between CECO ENVIRONMENTAL and Sparta AG, you can compare the effects of market volatilities on CECO ENVIRONMENTAL and Sparta AG 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 Sparta AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of CECO ENVIRONMENTAL and Sparta AG.

Diversification Opportunities for CECO ENVIRONMENTAL and Sparta AG

-0.02

Correlation Coefficient

CECO ENVIRONMENTAL  Sparta AG

Good diversification

The 3 months correlation between CECO and Sparta is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding CECO ENVIRONMENTAL and Sparta AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta AG 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 Sparta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta AG has no effect on the direction of CECO ENVIRONMENTAL i.e., CECO ENVIRONMENTAL and Sparta AG go up and down completely randomly.

Pair Corralation between CECO ENVIRONMENTAL and Sparta AG

Assuming the 90 days trading horizon CECO ENVIRONMENTAL is expected to generate 1.73 times more return on investment than Sparta AG. However, CECO ENVIRONMENTAL is 1.73 times more volatile than Sparta AG. It trades about 0.09 of its potential returns per unit of risk. Sparta AG is currently generating about 0.1 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CECO ENVIRONMENTAL  vs.  Sparta AG

CECO ENVIRONMENTAL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CECO ENVIRONMENTAL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CECO ENVIRONMENTAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sparta AG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sparta AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sparta AG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CECO ENVIRONMENTAL and Sparta AG

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

The idea behind CECO ENVIRONMENTAL and Sparta AG 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.