Correlation Between Ecolab and Spyre Therapeutics

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

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

Diversification Opportunities for Ecolab and Spyre Therapeutics

0.52

Correlation Coefficient

Ecolab  Spyre Therapeutics

Very weak diversification

The 3 months correlation between Ecolab and Spyre is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Spyre Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spyre Therapeutics 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 Spyre Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spyre Therapeutics has no effect on the direction of Ecolab i.e., Ecolab and Spyre Therapeutics go up and down completely randomly.

Pair Corralation between Ecolab and Spyre Therapeutics

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.23 times more return on investment than Spyre Therapeutics. However, Ecolab Inc is 4.4 times less risky than Spyre Therapeutics. It trades about -0.15 of its potential returns per unit of risk. Spyre Therapeutics is currently generating about -0.21 per unit of risk. If you would invest  24,620  in Ecolab Inc on October 6, 2024 and sell it today you would lose (1,427) from holding Ecolab Inc or give up 5.8% of portfolio value over 90 days.

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

Ecolab Inc  vs.  Spyre Therapeutics

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 unfluctuating 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.

Spyre Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spyre Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ecolab and Spyre Therapeutics

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

The idea behind Ecolab Inc and Spyre Therapeutics 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.