Correlation Between Ecolab and Logility Supply

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

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

Diversification Opportunities for Ecolab and Logility Supply

0.84

Correlation Coefficient

Ecolab  Logility Supply

Very poor diversification

The 3 months correlation between Ecolab and Logility is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Logility Supply Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logility Supply Chain 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 Logility Supply. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logility Supply Chain has no effect on the direction of Ecolab i.e., Ecolab and Logility Supply go up and down completely randomly.

Pair Corralation between Ecolab and Logility Supply

Considering the 90-day investment horizon Ecolab is expected to generate 5.28 times less return on investment than Logility Supply. But when comparing it to its historical volatility, Ecolab Inc is 2.58 times less risky than Logility Supply. It trades about 0.08 of its potential returns per unit of risk. Logility Supply Chain is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,070  in Logility Supply Chain on December 21, 2024 and sell it today you would earn a total of  355.00  from holding Logility Supply Chain or generate 33.18% return on investment over 90 days.

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

Ecolab Inc  vs.  Logility Supply Chain

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 persistent fundamental indicators, Ecolab is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Logility Supply Chain

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Logility Supply Chain are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Logility Supply showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecolab and Logility Supply

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

The idea behind Ecolab Inc and Logility Supply Chain 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.