Correlation Between Ecolab and Aptiv PLC
Can any of the company-specific risk be diversified away by investing in both Ecolab and Aptiv PLC 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 Aptiv PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and Aptiv PLC, you can compare the effects of market volatilities on Ecolab and Aptiv PLC 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 Aptiv PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Aptiv PLC.
Diversification Opportunities for Ecolab and Aptiv PLC
Significant diversification
The 3 months correlation between Ecolab and Aptiv is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Aptiv PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptiv PLC 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 Aptiv PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptiv PLC has no effect on the direction of Ecolab i.e., Ecolab and Aptiv PLC go up and down completely randomly.
Pair Corralation between Ecolab and Aptiv PLC
Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.85 times more return on investment than Aptiv PLC. However, Ecolab Inc is 1.18 times less risky than Aptiv PLC. It trades about 0.35 of its potential returns per unit of risk. Aptiv PLC is currently generating about 0.12 per unit of risk. If you would invest 23,193 in Ecolab Inc on November 4, 2024 and sell it today you would earn a total of 1,826 from holding Ecolab Inc or generate 7.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecolab Inc vs. Aptiv PLC
Performance |
| Timeline |
| Ecolab Inc |
| Aptiv PLC |
Ecolab and Aptiv PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and Aptiv PLC
The main advantage of trading using opposite Ecolab and Aptiv PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Aptiv PLC 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 Aptiv PLC will offset losses from the drop in Aptiv PLC's long position.| Ecolab vs. Linde plc Ordinary | Ecolab vs. PPG Industries | Ecolab vs. Sherwin Williams Co | Ecolab vs. LyondellBasell Industries NV |
| Aptiv PLC vs. Allison Transmission Holdings | Aptiv PLC vs. LKQ Corporation | Aptiv PLC vs. Lear Corporation | Aptiv PLC vs. Magna International |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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