Correlation Between Ecolab and Collective Mining

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

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

Diversification Opportunities for Ecolab and Collective Mining

0.52

Correlation Coefficient

Ecolab  Collective Mining

Very weak diversification

The 3 months correlation between Ecolab and Collective is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Collective Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collective Mining 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 Collective Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collective Mining has no effect on the direction of Ecolab i.e., Ecolab and Collective Mining go up and down completely randomly.

Pair Corralation between Ecolab and Collective Mining

Considering the 90-day investment horizon Ecolab is expected to generate 13.09 times less return on investment than Collective Mining. But when comparing it to its historical volatility, Ecolab Inc is 3.16 times less risky than Collective Mining. It trades about 0.08 of its potential returns per unit of risk. Collective Mining is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  414.00  in Collective Mining on December 26, 2024 and sell it today you would earn a total of  452.00  from holding Collective Mining or generate 109.18% return on investment over 90 days.

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

Ecolab Inc  vs.  Collective Mining

Ecolab Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Ecolab is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Collective Mining

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Collective Mining are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Collective Mining disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecolab and Collective Mining

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

The idea behind Ecolab Inc and Collective Mining 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.