Correlation Between Ecolab and MTRLimited
Can any of the company-specific risk be diversified away by investing in both Ecolab and MTRLimited 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 MTRLimited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and MTR Limited, you can compare the effects of market volatilities on Ecolab and MTRLimited 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 MTRLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and MTRLimited.
Diversification Opportunities for Ecolab and MTRLimited
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ecolab and MTRLimited is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and MTR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTR Limited 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 MTRLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTR Limited has no effect on the direction of Ecolab i.e., Ecolab and MTRLimited go up and down completely randomly.
Pair Corralation between Ecolab and MTRLimited
Assuming the 90 days horizon Ecolab Inc is expected to generate 1.11 times more return on investment than MTRLimited. However, Ecolab is 1.11 times more volatile than MTR Limited. It trades about -0.01 of its potential returns per unit of risk. MTR Limited is currently generating about -0.06 per unit of risk. If you would invest 23,500 in Ecolab Inc on August 31, 2024 and sell it today you would lose (100.00) from holding Ecolab Inc or give up 0.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecolab Inc vs. MTR Limited
Performance |
| Timeline |
| Ecolab Inc |
| MTR Limited |
Ecolab and MTRLimited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and MTRLimited
The main advantage of trading using opposite Ecolab and MTRLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, MTRLimited 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 MTRLimited will offset losses from the drop in MTRLimited's long position.| Ecolab vs. WILLIS LEASE FIN | Ecolab vs. Performance Food Group | Ecolab vs. Tyson Foods | Ecolab vs. United Natural Foods |
| MTRLimited vs. Union Pacific | MTRLimited vs. Superior Plus Corp | MTRLimited vs. NMI Holdings | MTRLimited vs. Origin Agritech |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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