Correlation Between Ecolab and Harley Davidson

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

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

Diversification Opportunities for Ecolab and Harley Davidson

-0.77

Correlation Coefficient

Ecolab  Harley Davidson

Pay attention - limited upside

The 3 months correlation between Ecolab and Harley is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Harley Davidson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harley Davidson 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 Harley Davidson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harley Davidson has no effect on the direction of Ecolab i.e., Ecolab and Harley Davidson go up and down completely randomly.

Pair Corralation between Ecolab and Harley Davidson

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.58 times more return on investment than Harley Davidson. However, Ecolab Inc is 1.73 times less risky than Harley Davidson. It trades about 0.09 of its potential returns per unit of risk. Harley Davidson is currently generating about -0.1 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  1,553  from holding Ecolab Inc or generate 6.55% 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.  Harley Davidson

Ecolab Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 7 (%) 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.

Harley Davidson

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harley Davidson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic 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 Harley Davidson

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

The idea behind Ecolab Inc and Harley Davidson 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.