Correlation Between CosmoSteel Holdings and Ecolab

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

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

Diversification Opportunities for CosmoSteel Holdings and Ecolab

0.13

Correlation Coefficient

CosmoSteel Holdings  Ecolab

Average diversification

The 3 months correlation between CosmoSteel and Ecolab is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding CosmoSteel Holdings Limited and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and CosmoSteel Holdings 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 CosmoSteel Holdings Limited 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 CosmoSteel Holdings i.e., CosmoSteel Holdings and Ecolab go up and down completely randomly.

Pair Corralation between CosmoSteel Holdings and Ecolab

Assuming the 90 days horizon CosmoSteel Holdings Limited is expected to generate 4.99 times more return on investment than Ecolab. However, CosmoSteel Holdings is 4.99 times more volatile than Ecolab Inc. It trades about 0.05 of its potential returns per unit of risk. Ecolab Inc is currently generating about -0.16 per unit of risk. If you would invest  6.45  in CosmoSteel Holdings Limited on October 5, 2024 and sell it today you would earn a total of  0.15  from holding CosmoSteel Holdings Limited or generate 2.33% return on investment over 90 days.

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

CosmoSteel Holdings Limited  vs.  Ecolab Inc

CosmoSteel Holdings

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days CosmoSteel Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CosmoSteel Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 nearly stable basic indicators, Ecolab is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CosmoSteel Holdings and Ecolab

The main advantage of trading using opposite CosmoSteel Holdings and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CosmoSteel Holdings 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 CosmoSteel Holdings Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.