Correlation Between Ecolab and Uranium Energy

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

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

Diversification Opportunities for Ecolab and Uranium Energy

-0.15

Correlation Coefficient

Ecolab  Uranium Energy

Good diversification

The 3 months correlation between Ecolab and Uranium is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Uranium Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uranium Energy Corp 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 Uranium Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uranium Energy Corp has no effect on the direction of Ecolab i.e., Ecolab and Uranium Energy go up and down completely randomly.

Pair Corralation between Ecolab and Uranium Energy

Considering the 90-day investment horizon Ecolab is expected to generate 14.99 times less return on investment than Uranium Energy. But when comparing it to its historical volatility, Ecolab Inc is 3.48 times less risky than Uranium Energy. It trades about 0.01 of its potential returns per unit of risk. Uranium Energy Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  601.00  in Uranium Energy Corp on September 26, 2024 and sell it today you would earn a total of  113.00  from holding Uranium Energy Corp or generate 18.8% return on investment over 90 days.

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

Ecolab Inc  vs.  Uranium Energy Corp

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 quite persistent fundamental indicators, Ecolab is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Uranium Energy Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Uranium Energy Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Uranium Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecolab and Uranium Energy

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

The idea behind Ecolab Inc and Uranium Energy Corp 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.