Correlation Between Ecolab and Stratasys

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

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

Diversification Opportunities for Ecolab and Stratasys

-0.59

Correlation Coefficient

Ecolab  Stratasys

Excellent diversification

The 3 months correlation between Ecolab and Stratasys is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Stratasys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stratasys 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 Stratasys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stratasys has no effect on the direction of Ecolab i.e., Ecolab and Stratasys go up and down completely randomly.

Pair Corralation between Ecolab and Stratasys

Considering the 90-day investment horizon Ecolab Inc is expected to under-perform the Stratasys. But the stock apears to be less risky and, when comparing its historical volatility, Ecolab Inc is 4.7 times less risky than Stratasys. The stock trades about -0.11 of its potential returns per unit of risk. The Stratasys is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  831.00  in Stratasys on September 29, 2024 and sell it today you would earn a total of  84.00  from holding Stratasys or generate 10.11% return on investment over 90 days.

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

Ecolab Inc  vs.  Stratasys

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 latest unsteady performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Stratasys

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stratasys are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Stratasys unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecolab and Stratasys

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

The idea behind Ecolab Inc and Stratasys 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.