Correlation Between Ecolab and Gentex

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

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

Diversification Opportunities for Ecolab and Gentex

-0.78

Correlation Coefficient

Ecolab  Gentex

Pay attention - limited upside

The 3 months correlation between Ecolab and Gentex is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Ecolab i.e., Ecolab and Gentex go up and down completely randomly.

Pair Corralation between Ecolab and Gentex

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.7 times more return on investment than Gentex. However, Ecolab Inc is 1.42 times less risky than Gentex. It trades about 0.09 of its potential returns per unit of risk. Gentex is currently generating about -0.14 per unit of risk. If you would invest  23,715  in Ecolab Inc on December 27, 2024 and sell it today you would earn a total of  1,524  from holding Ecolab Inc or generate 6.43% 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.  Gentex

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 unfluctuating fundamental indicators, Ecolab may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Gentex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gentex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ecolab and Gentex

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

The idea behind Ecolab Inc and Gentex 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.