Correlation Between Ecolab and Lead Real

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

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

Diversification Opportunities for Ecolab and Lead Real

-0.65

Correlation Coefficient

Ecolab  Lead Real

Excellent diversification

The 3 months correlation between Ecolab and Lead is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Lead Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lead Real Estate 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 Lead Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lead Real Estate has no effect on the direction of Ecolab i.e., Ecolab and Lead Real go up and down completely randomly.

Pair Corralation between Ecolab and Lead Real

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.05 times more return on investment than Lead Real. However, Ecolab Inc is 21.28 times less risky than Lead Real. It trades about -0.13 of its potential returns per unit of risk. Lead Real Estate is currently generating about -0.24 per unit of risk. If you would invest  24,627  in Ecolab Inc on September 25, 2024 and sell it today you would lose (693.50) from holding Ecolab Inc or give up 2.82% of portfolio value over 90 days.

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

Ecolab Inc  vs.  Lead Real Estate

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

Lead Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lead Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ecolab and Lead Real

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

The idea behind Ecolab Inc and Lead Real Estate 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.