Correlation Between Ecolab and HNI Corp

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

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

Diversification Opportunities for Ecolab and HNI Corp

0.26

Correlation Coefficient

Ecolab  HNI Corp

Modest diversification

The 3 months correlation between Ecolab and HNI is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and HNI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNI Corp 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 HNI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNI Corp has no effect on the direction of Ecolab i.e., Ecolab and HNI Corp go up and down completely randomly.

Pair Corralation between Ecolab and HNI Corp

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.96 times more return on investment than HNI Corp. However, Ecolab Inc is 1.04 times less risky than HNI Corp. It trades about 0.29 of its potential returns per unit of risk. HNI Corp is currently generating about -0.06 per unit of risk. If you would invest  24,107  in Ecolab Inc on November 19, 2024 and sell it today you would earn a total of  2,367  from holding Ecolab Inc or generate 9.82% return on investment over 90 days.

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

Ecolab Inc  vs.  HNI Corp

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 March 2025.

HNI Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days HNI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Ecolab and HNI Corp

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

The idea behind Ecolab Inc and HNI Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.