Correlation Between 35137LAJ4 and Ecolab

Can any of the company-specific risk be diversified away by investing in both 35137LAJ4 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 35137LAJ4 and Ecolab into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FOX P and Ecolab Inc, you can compare the effects of market volatilities on 35137LAJ4 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 35137LAJ4 with a short position of Ecolab. Check out your portfolio center. Please also check ongoing floating volatility patterns of 35137LAJ4 and Ecolab.

Diversification Opportunities for 35137LAJ4 and Ecolab

0.27

Correlation Coefficient

35137LAJ4  Ecolab

Modest diversification

The 3 months correlation between 35137LAJ4 and Ecolab is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding FOX P and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and 35137LAJ4 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 FOX P 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 35137LAJ4 i.e., 35137LAJ4 and Ecolab go up and down completely randomly.

Pair Corralation between 35137LAJ4 and Ecolab

Assuming the 90 days trading horizon FOX P is expected to under-perform the Ecolab. But the bond apears to be less risky and, when comparing its historical volatility, FOX P is 1.16 times less risky than Ecolab. The bond trades about -0.29 of its potential returns per unit of risk. The Ecolab Inc is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  24,627  in Ecolab Inc on September 25, 2024 and sell it today you would lose (693.50) from holding Ecolab Inc or give up 2.82% of portfolio value over 90 days.

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

FOX P  vs.  Ecolab Inc

35137LAJ4

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FOX P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for FOX P investors.

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

Pair Trading with 35137LAJ4 and Ecolab

The main advantage of trading using opposite 35137LAJ4 and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 35137LAJ4 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 FOX P 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.