Correlation Between Ecolab and United Guardian
Can any of the company-specific risk be diversified away by investing in both Ecolab and United Guardian 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 United Guardian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and United Guardian, you can compare the effects of market volatilities on Ecolab and United Guardian 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 United Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and United Guardian.
Diversification Opportunities for Ecolab and United Guardian
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ecolab and United is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Ecolab i.e., Ecolab and United Guardian go up and down completely randomly.
Pair Corralation between Ecolab and United Guardian
Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.61 times more return on investment than United Guardian. However, Ecolab Inc is 1.64 times less risky than United Guardian. It trades about 0.09 of its potential returns per unit of risk. United Guardian is currently generating about -0.03 per unit of risk. If you would invest 23,715 in Ecolab Inc on December 27, 2024 and sell it today you would earn a total of 1,524 from holding Ecolab Inc or generate 6.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Ecolab Inc vs. United Guardian
Performance |
Timeline |
Ecolab Inc |
United Guardian |
Ecolab and United Guardian Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ecolab and United Guardian
The main advantage of trading using opposite Ecolab and United Guardian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, United Guardian 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 United Guardian will offset losses from the drop in United Guardian's long position.Ecolab vs. Linde plc Ordinary | Ecolab vs. PPG Industries | Ecolab vs. Sherwin Williams Co | Ecolab vs. LyondellBasell Industries NV |
United Guardian vs. Utah Medical Products | United Guardian vs. Union Bankshares | United Guardian vs. Unity Bancorp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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