Correlation Between Ecolab and Marine Products

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

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

Diversification Opportunities for Ecolab and Marine Products

-0.37

Correlation Coefficient

Ecolab  Marine Products

Very good diversification

The 3 months correlation between Ecolab and Marine is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Marine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Products 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 Marine Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Products has no effect on the direction of Ecolab i.e., Ecolab and Marine Products go up and down completely randomly.

Pair Corralation between Ecolab and Marine Products

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.41 times more return on investment than Marine Products. However, Ecolab Inc is 2.45 times less risky than Marine Products. It trades about 0.08 of its potential returns per unit of risk. Marine Products is currently generating about -0.02 per unit of risk. If you would invest  24,597  in Ecolab Inc on September 17, 2024 and sell it today you would earn a total of  243.00  from holding Ecolab Inc or generate 0.99% 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.  Marine Products

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 current stock price mess, may contribute to short-term losses for the institutional investors.

Marine Products

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marine Products are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Marine Products is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ecolab and Marine Products

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

The idea behind Ecolab Inc and Marine Products 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.