Correlation Between Ecolab and BCB Bancorp

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

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

Diversification Opportunities for Ecolab and BCB Bancorp

0.48

Correlation Coefficient

Ecolab  BCB Bancorp

Very weak diversification

The 3 months correlation between Ecolab and BCB is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and BCB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCB Bancorp 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 BCB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCB Bancorp has no effect on the direction of Ecolab i.e., Ecolab and BCB Bancorp go up and down completely randomly.

Pair Corralation between Ecolab and BCB Bancorp

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.57 times more return on investment than BCB Bancorp. However, Ecolab Inc is 1.76 times less risky than BCB Bancorp. It trades about -0.03 of its potential returns per unit of risk. BCB Bancorp is currently generating about -0.02 per unit of risk. If you would invest  23,909  in Ecolab Inc on October 22, 2024 and sell it today you would lose (167.00) from holding Ecolab Inc or give up 0.7% of portfolio value over 90 days.

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

Ecolab Inc  vs.  BCB Bancorp

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 latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

BCB Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCB Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, BCB Bancorp is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ecolab and BCB Bancorp

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

The idea behind Ecolab Inc and BCB Bancorp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.