Correlation Between Ecolab and Capital One
Can any of the company-specific risk be diversified away by investing in both Ecolab and Capital One 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 Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and Capital One Financial, you can compare the effects of market volatilities on Ecolab and Capital One 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 Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Capital One.
Diversification Opportunities for Ecolab and Capital One
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ecolab and Capital is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Ecolab i.e., Ecolab and Capital One go up and down completely randomly.
Pair Corralation between Ecolab and Capital One
Assuming the 90 days trading horizon Ecolab is expected to generate 1.56 times less return on investment than Capital One. But when comparing it to its historical volatility, Ecolab Inc is 2.66 times less risky than Capital One. It trades about 0.13 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 179,475 in Capital One Financial on September 3, 2024 and sell it today you would earn a total of 211,437 from holding Capital One Financial or generate 117.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Ecolab Inc vs. Capital One Financial
Performance |
| Timeline |
| Ecolab Inc |
| Capital One Financial |
Ecolab and Capital One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and Capital One
The main advantage of trading using opposite Ecolab and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Capital One 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 Capital One will offset losses from the drop in Capital One's long position.| Ecolab vs. Capital One Financial | Ecolab vs. Genworth Financial | Ecolab vs. First Majestic Silver | Ecolab vs. GMxico Transportes SAB |
| Capital One vs. GMxico Transportes SAB | Capital One vs. The Bank of | Capital One vs. Southern Copper | Capital One vs. Grupo Sports World |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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