Correlation Between Ecolab and HEXPOL AB

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

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

Diversification Opportunities for Ecolab and HEXPOL AB

0.49

Correlation Coefficient

Ecolab  HEXPOL AB

Very weak diversification

The 3 months correlation between Ecolab and HEXPOL is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and HEXPOL AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEXPOL AB 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 HEXPOL AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEXPOL AB has no effect on the direction of Ecolab i.e., Ecolab and HEXPOL AB go up and down completely randomly.

Pair Corralation between Ecolab and HEXPOL AB

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.45 times more return on investment than HEXPOL AB. However, Ecolab Inc is 2.23 times less risky than HEXPOL AB. It trades about -0.11 of its potential returns per unit of risk. HEXPOL AB is currently generating about -0.07 per unit of risk. If you would invest  24,840  in Ecolab Inc on October 6, 2024 and sell it today you would lose (1,647) from holding Ecolab Inc or give up 6.63% of portfolio value over 90 days.

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

Ecolab Inc  vs.  HEXPOL AB

Ecolab Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecolab Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

HEXPOL AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEXPOL AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ecolab and HEXPOL AB

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

The idea behind Ecolab Inc and HEXPOL AB 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.