Correlation Between Ecolab and 06050WHM0

Can any of the company-specific risk be diversified away by investing in both Ecolab and 06050WHM0 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 06050WHM0 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ecolab Inc and US06050WHM01, you can compare the effects of market volatilities on Ecolab and 06050WHM0 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 06050WHM0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and 06050WHM0.

Diversification Opportunities for Ecolab and 06050WHM0

-0.4

Correlation Coefficient

Ecolab  06050WHM0

Very good diversification

The 3 months correlation between Ecolab and 06050WHM0 is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and US06050WHM01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US06050WHM01 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 06050WHM0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US06050WHM01 has no effect on the direction of Ecolab i.e., Ecolab and 06050WHM0 go up and down completely randomly.

Pair Corralation between Ecolab and 06050WHM0

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.31 times more return on investment than 06050WHM0. However, Ecolab Inc is 3.19 times less risky than 06050WHM0. It trades about -0.02 of its potential returns per unit of risk. US06050WHM01 is currently generating about -0.12 per unit of risk. If you would invest  25,263  in Ecolab Inc on September 14, 2024 and sell it today you would lose (382.00) from holding Ecolab Inc or give up 1.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	38.1%
Values	Daily Returns

Ecolab Inc  vs.  US06050WHM01

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 current stock price mess, may contribute to short-term losses for the institutional investors.

US06050WHM01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US06050WHM01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for US06050WHM01 investors.

Pair Trading with Ecolab and 06050WHM0

The main advantage of trading using opposite Ecolab and 06050WHM0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, 06050WHM0 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 06050WHM0 will offset losses from the drop in 06050WHM0's long position.

The idea behind Ecolab Inc and US06050WHM01 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.