Correlation Between Ecolab and 62886EAY4

Can any of the company-specific risk be diversified away by investing in both Ecolab and 62886EAY4 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 62886EAY4 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ecolab Inc and NCR P NEW, you can compare the effects of market volatilities on Ecolab and 62886EAY4 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 62886EAY4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and 62886EAY4.

Diversification Opportunities for Ecolab and 62886EAY4

0.34

Correlation Coefficient

Ecolab  62886EAY4

Weak diversification

The 3 months correlation between Ecolab and 62886EAY4 is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and NCR P NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCR P NEW 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 62886EAY4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCR P NEW has no effect on the direction of Ecolab i.e., Ecolab and 62886EAY4 go up and down completely randomly.

Pair Corralation between Ecolab and 62886EAY4

Considering the 90-day investment horizon Ecolab Inc is expected to under-perform the 62886EAY4. In addition to that, Ecolab is 1.23 times more volatile than NCR P NEW. It trades about -0.13 of its total potential returns per unit of risk. NCR P NEW is currently generating about 0.2 per unit of volatility. If you would invest  9,684  in NCR P NEW on September 25, 2024 and sell it today you would earn a total of  294.00  from holding NCR P NEW or generate 3.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Ecolab Inc  vs.  NCR P NEW

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.

NCR P NEW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NCR P NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 62886EAY4 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ecolab and 62886EAY4

The main advantage of trading using opposite Ecolab and 62886EAY4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, 62886EAY4 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 62886EAY4 will offset losses from the drop in 62886EAY4's long position.

The idea behind Ecolab Inc and NCR P NEW 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.