Correlation Between Ecolab and SVENSKA AEROGEL

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

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

Diversification Opportunities for Ecolab and SVENSKA AEROGEL

0.16

Correlation Coefficient

Ecolab  SVENSKA AEROGEL

Average diversification

The 3 months correlation between Ecolab and SVENSKA is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and SVENSKA AEROGEL HOLDING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SVENSKA AEROGEL HOLDING and Ecolab 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 Ecolab Inc are associated (or correlated) with SVENSKA AEROGEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SVENSKA AEROGEL HOLDING has no effect on the direction of Ecolab i.e., Ecolab and SVENSKA AEROGEL go up and down completely randomly.

Pair Corralation between Ecolab and SVENSKA AEROGEL

Assuming the 90 days horizon Ecolab is expected to generate 646.56 times less return on investment than SVENSKA AEROGEL. But when comparing it to its historical volatility, Ecolab Inc is 196.27 times less risky than SVENSKA AEROGEL. It trades about 0.08 of its potential returns per unit of risk. SVENSKA AEROGEL HOLDING is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  371.00  in SVENSKA AEROGEL HOLDING on October 4, 2024 and sell it today you would lose (321.00) from holding SVENSKA AEROGEL HOLDING or give up 86.52% of portfolio value over 90 days.

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

Ecolab Inc  vs.  SVENSKA AEROGEL HOLDING

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

SVENSKA AEROGEL HOLDING

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SVENSKA AEROGEL HOLDING are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SVENSKA AEROGEL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecolab and SVENSKA AEROGEL

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

The idea behind Ecolab Inc and SVENSKA AEROGEL HOLDING 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.