Correlation Between Ecolab and Trinseo SA

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

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

Diversification Opportunities for Ecolab and Trinseo SA

0.18

Correlation Coefficient

Ecolab  Trinseo SA

Average diversification

The 3 months correlation between Ecolab and Trinseo is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Trinseo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinseo SA 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 Trinseo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinseo SA has no effect on the direction of Ecolab i.e., Ecolab and Trinseo SA go up and down completely randomly.

Pair Corralation between Ecolab and Trinseo SA

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.26 times more return on investment than Trinseo SA. However, Ecolab Inc is 3.79 times less risky than Trinseo SA. It trades about 0.11 of its potential returns per unit of risk. Trinseo SA is currently generating about -0.07 per unit of risk. If you would invest  23,391  in Ecolab Inc on December 28, 2024 and sell it today you would earn a total of  1,877  from holding Ecolab Inc or generate 8.02% return on investment over 90 days.

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

Ecolab Inc  vs.  Trinseo SA

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.

Trinseo SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trinseo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ecolab and Trinseo SA

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

The idea behind Ecolab Inc and Trinseo SA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..