Correlation Between Ecolab and Welsbach Technology

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

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

Diversification Opportunities for Ecolab and Welsbach Technology

-0.37

Correlation Coefficient

Ecolab  Welsbach Technology

Very good diversification

The 3 months correlation between Ecolab and Welsbach is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Welsbach Technology Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welsbach Technology 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 Welsbach Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welsbach Technology has no effect on the direction of Ecolab i.e., Ecolab and Welsbach Technology go up and down completely randomly.

Pair Corralation between Ecolab and Welsbach Technology

Considering the 90-day investment horizon Ecolab Inc is expected to under-perform the Welsbach Technology. But the stock apears to be less risky and, when comparing its historical volatility, Ecolab Inc is 1.31 times less risky than Welsbach Technology. The stock trades about -0.06 of its potential returns per unit of risk. The Welsbach Technology Metals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,127  in Welsbach Technology Metals on October 3, 2024 and sell it today you would earn a total of  142.00  from holding Welsbach Technology Metals or generate 12.6% 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.  Welsbach Technology Metals

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 latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Welsbach Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Welsbach Technology Metals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Welsbach Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecolab and Welsbach Technology

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

The idea behind Ecolab Inc and Welsbach Technology Metals 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.