Correlation Between Ecolab and Eastern

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

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

Diversification Opportunities for Ecolab and Eastern

0.76

Correlation Coefficient

Ecolab  Eastern

Poor diversification

The 3 months correlation between Ecolab and Eastern is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern and Ecolab 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 Ecolab Inc are associated (or correlated) with Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern has no effect on the direction of Ecolab i.e., Ecolab and Eastern go up and down completely randomly.

Pair Corralation between Ecolab and Eastern

Considering the 90-day investment horizon Ecolab is expected to generate 1.74 times less return on investment than Eastern. But when comparing it to its historical volatility, Ecolab Inc is 2.31 times less risky than Eastern. It trades about 0.08 of its potential returns per unit of risk. Eastern Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,072  in Eastern Co on September 12, 2024 and sell it today you would earn a total of  825.00  from holding Eastern Co or generate 39.82% return on investment over 90 days.

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

Ecolab Inc  vs.  Eastern Co

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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, Eastern 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 Ecolab and Eastern

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

The idea behind Ecolab Inc and Eastern Co 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.