Correlation Between BrightSpring Health and Ecolab

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

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

Diversification Opportunities for BrightSpring Health and Ecolab

-0.32

Correlation Coefficient

BrightSpring Health  Ecolab

Very good diversification

The 3 months correlation between BrightSpring and Ecolab is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding BrightSpring Health Services, and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and BrightSpring Health 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 BrightSpring Health Services, 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 BrightSpring Health i.e., BrightSpring Health and Ecolab go up and down completely randomly.

Pair Corralation between BrightSpring Health and Ecolab

Assuming the 90 days horizon BrightSpring Health Services, is expected to generate 2.73 times more return on investment than Ecolab. However, BrightSpring Health is 2.73 times more volatile than Ecolab Inc. It trades about 0.23 of its potential returns per unit of risk. Ecolab Inc is currently generating about 0.02 per unit of risk. If you would invest  4,988  in BrightSpring Health Services, on September 4, 2024 and sell it today you would earn a total of  1,919  from holding BrightSpring Health Services, or generate 38.47% return on investment over 90 days.

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

BrightSpring Health Services,  vs.  Ecolab Inc

BrightSpring Health

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BrightSpring Health Services, are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, BrightSpring Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ecolab Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Ecolab is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with BrightSpring Health and Ecolab

The main advantage of trading using opposite BrightSpring Health and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BrightSpring Health 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 BrightSpring Health Services, 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.