Correlation Between Ecolab and Atmus Filtration

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

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

Diversification Opportunities for Ecolab and Atmus Filtration

-0.41

Correlation Coefficient

Ecolab  Atmus Filtration

Very good diversification

The 3 months correlation between Ecolab and Atmus is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Atmus Filtration Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmus Filtration Tec 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 Atmus Filtration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmus Filtration Tec has no effect on the direction of Ecolab i.e., Ecolab and Atmus Filtration go up and down completely randomly.

Pair Corralation between Ecolab and Atmus Filtration

Considering the 90-day investment horizon Ecolab is expected to generate 1.85 times less return on investment than Atmus Filtration. But when comparing it to its historical volatility, Ecolab Inc is 1.68 times less risky than Atmus Filtration. It trades about 0.09 of its potential returns per unit of risk. Atmus Filtration Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,947  in Atmus Filtration Technologies on September 25, 2024 and sell it today you would earn a total of  1,957  from holding Atmus Filtration Technologies or generate 100.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.08%
Values	Daily Returns

Ecolab Inc  vs.  Atmus Filtration Technologies

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 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.

Atmus Filtration Tec

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Atmus Filtration Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Atmus Filtration is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ecolab and Atmus Filtration

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

The idea behind Ecolab Inc and Atmus Filtration Technologies 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.