Correlation Between LAir Liquide and Ecolab
Can any of the company-specific risk be diversified away by investing in both LAir Liquide 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 LAir Liquide and Ecolab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LAir Liquide SA and Ecolab Inc, you can compare the effects of market volatilities on LAir Liquide 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 LAir Liquide with a short position of Ecolab. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAir Liquide and Ecolab.
Diversification Opportunities for LAir Liquide and Ecolab
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LAir and Ecolab is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding LAir Liquide SA and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and LAir Liquide 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 LAir Liquide SA 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 LAir Liquide i.e., LAir Liquide and Ecolab go up and down completely randomly.
Pair Corralation between LAir Liquide and Ecolab
Assuming the 90 days horizon LAir Liquide is expected to generate 4.46 times less return on investment than Ecolab. In addition to that, LAir Liquide is 1.3 times more volatile than Ecolab Inc. It trades about 0.02 of its total potential returns per unit of risk. Ecolab Inc is currently generating about 0.12 per unit of volatility. If you would invest 17,273 in Ecolab Inc on September 1, 2024 and sell it today you would earn a total of 7,604 from holding Ecolab Inc or generate 44.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LAir Liquide SA vs. Ecolab Inc
Performance |
| Timeline |
| LAir Liquide SA |
| Ecolab Inc |
LAir Liquide and Ecolab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LAir Liquide and Ecolab
The main advantage of trading using opposite LAir Liquide and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAir Liquide 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.| LAir Liquide vs. Sherwin Williams Co | LAir Liquide vs. Air Liquide SA | LAir Liquide vs. Air Products and | LAir Liquide vs. Ecolab Inc |
| Ecolab vs. Linde plc Ordinary | Ecolab vs. Air Products and | Ecolab vs. Aquagold International | Ecolab vs. Thrivent High Yield |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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