Correlation Between Ecolab and PPG Industries
Can any of the company-specific risk be diversified away by investing in both Ecolab and PPG Industries 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 PPG Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and PPG Industries, you can compare the effects of market volatilities on Ecolab and PPG Industries 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 PPG Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and PPG Industries.
Diversification Opportunities for Ecolab and PPG Industries
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ecolab and PPG is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG Industries 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 PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of Ecolab i.e., Ecolab and PPG Industries go up and down completely randomly.
Pair Corralation between Ecolab and PPG Industries
Assuming the 90 days trading horizon Ecolab Inc is expected to generate 0.99 times more return on investment than PPG Industries. However, Ecolab Inc is 1.01 times less risky than PPG Industries. It trades about 0.13 of its potential returns per unit of risk. PPG Industries is currently generating about 0.01 per unit of risk. If you would invest 281,915 in Ecolab Inc on September 2, 2024 and sell it today you would earn a total of 212,538 from holding Ecolab Inc or generate 75.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecolab Inc vs. PPG Industries
Performance |
| Timeline |
| Ecolab Inc |
| PPG Industries |
Ecolab and PPG Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and PPG Industries
The main advantage of trading using opposite Ecolab and PPG Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, PPG Industries 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 PPG Industries will offset losses from the drop in PPG Industries' long position.The idea behind Ecolab Inc and PPG Industries 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.| PPG Industries vs. Lloyds Banking Group | PPG Industries vs. UnitedHealth Group Incorporated | PPG Industries vs. Monster Beverage Corp | PPG Industries vs. Cognizant Technology Solutions |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |