Correlation Between Lion One and Ecolab

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

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

Diversification Opportunities for Lion One and Ecolab

0.17

Correlation Coefficient

Lion One  Ecolab

Average diversification

The 3 months correlation between Lion and Ecolab is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and Lion One 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 Lion One Metals 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 Lion One i.e., Lion One and Ecolab go up and down completely randomly.

Pair Corralation between Lion One and Ecolab

Assuming the 90 days horizon Lion One is expected to generate 3.04 times less return on investment than Ecolab. In addition to that, Lion One is 4.47 times more volatile than Ecolab Inc. It trades about 0.01 of its total potential returns per unit of risk. Ecolab Inc is currently generating about 0.08 per unit of volatility. If you would invest  22,553  in Ecolab Inc on September 12, 2024 and sell it today you would earn a total of  1,157  from holding Ecolab Inc or generate 5.13% return on investment over 90 days.

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

Lion One Metals  vs.  Ecolab Inc

Lion One Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion One Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lion One is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ecolab Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ecolab is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lion One and Ecolab

The main advantage of trading using opposite Lion One and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion One 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 Lion One Metals 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.