Correlation Between PETRONAS Gas and Ecolab

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

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

Diversification Opportunities for PETRONAS Gas and Ecolab

0.41

Correlation Coefficient

PETRONAS Gas  Ecolab

Very weak diversification

The 3 months correlation between PETRONAS and Ecolab is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding PETRONAS Gas Berhad and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and PETRONAS Gas 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 PETRONAS Gas Berhad 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 PETRONAS Gas i.e., PETRONAS Gas and Ecolab go up and down completely randomly.

Pair Corralation between PETRONAS Gas and Ecolab

Assuming the 90 days horizon PETRONAS Gas Berhad is expected to under-perform the Ecolab. In addition to that, PETRONAS Gas is 1.86 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  23,847  in Ecolab Inc on December 21, 2024 and sell it today you would earn a total of  1,347  from holding Ecolab Inc or generate 5.65% return on investment over 90 days.

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

PETRONAS Gas Berhad  vs.  Ecolab Inc

PETRONAS Gas Berhad

Risk-Adjusted Performance

Very Weak

Over the last 90 days PETRONAS Gas Berhad has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, PETRONAS Gas is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 persistent fundamental indicators, Ecolab is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with PETRONAS Gas and Ecolab

The main advantage of trading using opposite PETRONAS Gas and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PETRONAS Gas 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 PETRONAS Gas Berhad 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..