Correlation Between Ecolab and Israel

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

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

Diversification Opportunities for Ecolab and Israel

-0.11

Correlation Coefficient

Ecolab  Israel

Good diversification

The 3 months correlation between Ecolab and Israel is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Israel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel 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 Israel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel has no effect on the direction of Ecolab i.e., Ecolab and Israel go up and down completely randomly.

Pair Corralation between Ecolab and Israel

Considering the 90-day investment horizon Ecolab is expected to generate 8.99 times less return on investment than Israel. But when comparing it to its historical volatility, Ecolab Inc is 10.21 times less risky than Israel. It trades about 0.11 of its potential returns per unit of risk. Israel is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  21,900  in Israel on December 1, 2024 and sell it today you would earn a total of  6,600  from holding Israel or generate 30.14% return on investment over 90 days.

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

Ecolab Inc  vs.  Israel

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.

Israel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Israel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, Israel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecolab and Israel

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

The idea behind Ecolab Inc and Israel 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.