Correlation Between Ecolab and Albemarle
Can any of the company-specific risk be diversified away by investing in both Ecolab and Albemarle 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 Albemarle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and Albemarle, you can compare the effects of market volatilities on Ecolab and Albemarle 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 Albemarle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Albemarle.
Diversification Opportunities for Ecolab and Albemarle
Weak diversification
The 3 months correlation between Ecolab and Albemarle is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Albemarle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle 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 Albemarle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle has no effect on the direction of Ecolab i.e., Ecolab and Albemarle go up and down completely randomly.
Pair Corralation between Ecolab and Albemarle
Assuming the 90 days horizon Ecolab Inc is expected to generate 0.28 times more return on investment than Albemarle. However, Ecolab Inc is 3.57 times less risky than Albemarle. It trades about -0.17 of its potential returns per unit of risk. Albemarle is currently generating about -0.28 per unit of risk. If you would invest 23,525 in Ecolab Inc on September 25, 2024 and sell it today you would lose (845.00) from holding Ecolab Inc or give up 3.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ecolab Inc vs. Albemarle
Performance |
| Timeline |
| Ecolab Inc |
| Albemarle |
Ecolab and Albemarle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and Albemarle
The main advantage of trading using opposite Ecolab and Albemarle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Albemarle 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 Albemarle will offset losses from the drop in Albemarle's long position.| Ecolab vs. Linde PLC | Ecolab vs. Air Liquide SA | Ecolab vs. The Sherwin Williams | Ecolab vs. Dupont De Nemours |
| Albemarle vs. Linde PLC | Albemarle vs. Air Liquide SA | Albemarle vs. The Sherwin Williams | Albemarle vs. Ecolab Inc |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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