Correlation Between Ecolab and Everus Construction

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

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

Diversification Opportunities for Ecolab and Everus Construction

-0.74

Correlation Coefficient

Ecolab  Everus Construction

Pay attention - limited upside

The 3 months correlation between Ecolab and Everus is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Everus Construction Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everus Construction 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 Everus Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everus Construction has no effect on the direction of Ecolab i.e., Ecolab and Everus Construction go up and down completely randomly.

Pair Corralation between Ecolab and Everus Construction

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.25 times more return on investment than Everus Construction. However, Ecolab Inc is 3.94 times less risky than Everus Construction. It trades about 0.11 of its potential returns per unit of risk. Everus Construction Group is currently generating about -0.19 per unit of risk. If you would invest  23,391  in Ecolab Inc on December 28, 2024 and sell it today you would earn a total of  1,877  from holding Ecolab Inc or generate 8.02% return on investment over 90 days.

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

Ecolab Inc  vs.  Everus Construction Group

Ecolab Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Ecolab may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Everus Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Everus Construction Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ecolab and Everus Construction

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

The idea behind Ecolab Inc and Everus Construction Group 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.