Correlation Between Ecolab and Albemarle

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

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

Diversification Opportunities for Ecolab and Albemarle

0.27

Correlation Coefficient

Ecolab  Albemarle

Modest diversification

The 3 months correlation between Ecolab and Albemarle is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Albemarle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle 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 Albemarle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle has no effect on the direction of Ecolab i.e., Ecolab and Albemarle go up and down completely randomly.

Pair Corralation between Ecolab and Albemarle

Assuming the 90 days horizon Ecolab Inc is expected to generate 0.32 times more return on investment than Albemarle. However, Ecolab Inc is 3.08 times less risky than Albemarle. It trades about 0.1 of its potential returns per unit of risk. Albemarle is currently generating about 0.0 per unit of risk. If you would invest  16,965  in Ecolab Inc on September 23, 2024 and sell it today you would earn a total of  6,065  from holding Ecolab Inc or generate 35.75% return on investment over 90 days.

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

Ecolab Inc  vs.  Albemarle

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 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.

Albemarle

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Albemarle are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Albemarle may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ecolab and Albemarle

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

The idea behind Ecolab Inc and Albemarle 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.