Correlation Between Ecolab and ReTo Eco

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

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

Diversification Opportunities for Ecolab and ReTo Eco

-0.57

Correlation Coefficient

Ecolab  ReTo Eco

Excellent diversification

The 3 months correlation between Ecolab and ReTo is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and ReTo Eco Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReTo Eco Solutions 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 ReTo Eco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReTo Eco Solutions has no effect on the direction of Ecolab i.e., Ecolab and ReTo Eco go up and down completely randomly.

Pair Corralation between Ecolab and ReTo Eco

Considering the 90-day investment horizon Ecolab is expected to generate 5.38 times less return on investment than ReTo Eco. But when comparing it to its historical volatility, Ecolab Inc is 16.78 times less risky than ReTo Eco. It trades about 0.31 of its potential returns per unit of risk. ReTo Eco Solutions is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  390.00  in ReTo Eco Solutions on December 10, 2024 and sell it today you would lose (1.00) from holding ReTo Eco Solutions or give up 0.26% of portfolio value over 90 days.

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

Ecolab Inc  vs.  ReTo Eco Solutions

Ecolab Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 9 (%) 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.

ReTo Eco Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days ReTo Eco Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Ecolab and ReTo Eco

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

The idea behind Ecolab Inc and ReTo Eco Solutions 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.