Correlation Between Oil Dri and Ecolab

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

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

Diversification Opportunities for Oil Dri and Ecolab

0.36

Correlation Coefficient

Oil Dri  Ecolab

Weak diversification

The 3 months correlation between Oil and Ecolab is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Oil Dri and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and Oil Dri 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 Oil Dri 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 Oil Dri i.e., Oil Dri and Ecolab go up and down completely randomly.

Pair Corralation between Oil Dri and Ecolab

Considering the 90-day investment horizon Oil Dri is expected to generate 1.17 times less return on investment than Ecolab. In addition to that, Oil Dri is 1.71 times more volatile than Ecolab Inc. It trades about 0.04 of its total potential returns per unit of risk. Ecolab Inc is currently generating about 0.09 per unit of volatility. If you would invest  23,715  in Ecolab Inc on December 27, 2024 and sell it today you would earn a total of  1,524  from holding Ecolab Inc or generate 6.43% return on investment over 90 days.

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

Oil Dri  vs.  Ecolab Inc

Oil Dri

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Dri are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Oil Dri is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ecolab Inc

Risk-Adjusted Performance

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 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 Oil Dri and Ecolab

The main advantage of trading using opposite Oil Dri and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Dri 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 Oil Dri 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.