Correlation Between Ecolab and X FAB

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

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

Diversification Opportunities for Ecolab and X FAB

0.52

Correlation Coefficient

Ecolab  X FAB

Very weak diversification

The 3 months correlation between Ecolab and XFABF is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Ecolab i.e., Ecolab and X FAB go up and down completely randomly.

Pair Corralation between Ecolab and X FAB

Considering the 90-day investment horizon Ecolab Inc is expected to under-perform the X FAB. But the stock apears to be less risky and, when comparing its historical volatility, Ecolab Inc is 1.38 times less risky than X FAB. The stock trades about -0.29 of its potential returns per unit of risk. The X FAB Silicon Foundries is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  514.00  in X FAB Silicon Foundries on October 6, 2024 and sell it today you would lose (22.00) from holding X FAB Silicon Foundries or give up 4.28% of portfolio value over 90 days.

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

Ecolab Inc  vs.  X FAB Silicon Foundries

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.

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ecolab and X FAB

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

The idea behind Ecolab Inc and X FAB Silicon Foundries 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.