Correlation Between Artisan Partners and Ecolab

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

By analyzing existing cross correlation between Artisan Partners Asset and Ecolab Inc, you can compare the effects of market volatilities on Artisan Partners and Ecolab 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 Artisan Partners with a short position of Ecolab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Artisan Partners and Ecolab.

Diversification Opportunities for Artisan Partners and Ecolab

0.4

Correlation Coefficient

Artisan Partners  Ecolab

Very weak diversification

The 3 months correlation between Artisan and Ecolab is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Artisan Partners Asset and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and Artisan Partners 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 Artisan Partners Asset are associated (or correlated) with Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of Artisan Partners i.e., Artisan Partners and Ecolab go up and down completely randomly.

Pair Corralation between Artisan Partners and Ecolab

Given the investment horizon of 90 days Artisan Partners Asset is expected to under-perform the Ecolab. In addition to that, Artisan Partners is 1.4 times more volatile than Ecolab Inc. It trades about -0.09 of its total potential returns per unit of risk. Ecolab Inc is currently generating about -0.03 per unit of volatility. If you would invest  23,909  in Ecolab Inc on October 22, 2024 and sell it today you would lose (167.00) from holding Ecolab Inc or give up 0.7% of portfolio value over 90 days.

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

Artisan Partners Asset  vs.  Ecolab Inc

Artisan Partners Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Artisan Partners Asset has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Artisan Partners is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Ecolab Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecolab Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Artisan Partners and Ecolab

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

The idea behind Artisan Partners Asset and Ecolab Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.