Correlation Between Givaudan and Ecolab

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

By analyzing existing cross correlation between Givaudan SA ADR and Ecolab Inc, you can compare the effects of market volatilities on Givaudan and Ecolab 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 Givaudan with a short position of Ecolab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Givaudan and Ecolab.

Diversification Opportunities for Givaudan and Ecolab

0.59

Correlation Coefficient

Givaudan  Ecolab

Very weak diversification

The 3 months correlation between Givaudan and Ecolab is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA ADR and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and Givaudan 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 Givaudan SA ADR are associated (or correlated) with Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of Givaudan i.e., Givaudan and Ecolab go up and down completely randomly.

Pair Corralation between Givaudan and Ecolab

Assuming the 90 days horizon Givaudan is expected to generate 4.23 times less return on investment than Ecolab. In addition to that, Givaudan is 1.34 times more volatile than Ecolab Inc. It trades about 0.02 of its total potential returns per unit of risk. Ecolab Inc is currently generating about 0.11 per unit of volatility. If you would invest  23,391  in Ecolab Inc on December 29, 2024 and sell it today you would earn a total of  1,877  from holding Ecolab Inc or generate 8.02% return on investment over 90 days.

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

Givaudan SA ADR  vs.  Ecolab Inc

Givaudan SA ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Givaudan SA ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Givaudan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ecolab Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Ecolab may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Givaudan and Ecolab

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

The idea behind Givaudan SA ADR and Ecolab Inc 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.