Correlation Between Ecolab and Sapiens International

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

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

Diversification Opportunities for Ecolab and Sapiens International

0.5

Correlation Coefficient

Ecolab  Sapiens International

Very weak diversification

The 3 months correlation between Ecolab and Sapiens is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Sapiens International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapiens International 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 Sapiens International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapiens International has no effect on the direction of Ecolab i.e., Ecolab and Sapiens International go up and down completely randomly.

Pair Corralation between Ecolab and Sapiens International

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.82 times more return on investment than Sapiens International. However, Ecolab Inc is 1.22 times less risky than Sapiens International. It trades about 0.11 of its potential returns per unit of risk. Sapiens International is currently generating about -0.03 per unit of risk. If you would invest  24,821  in Ecolab Inc on December 4, 2024 and sell it today you would earn a total of  2,080  from holding Ecolab Inc or generate 8.38% return on investment over 90 days.

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

Ecolab Inc  vs.  Sapiens International

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.

Sapiens International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sapiens International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sapiens International is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ecolab and Sapiens International

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

The idea behind Ecolab Inc and Sapiens International 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.