Correlation Between Ecolab and Arm Holdings
Can any of the company-specific risk be diversified away by investing in both Ecolab and Arm Holdings 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 Arm Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and Arm Holdings plc, you can compare the effects of market volatilities on Ecolab and Arm Holdings 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 Arm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Arm Holdings.
Diversification Opportunities for Ecolab and Arm Holdings
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ecolab and Arm is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings 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 Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of Ecolab i.e., Ecolab and Arm Holdings go up and down completely randomly.
Pair Corralation between Ecolab and Arm Holdings
Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.28 times more return on investment than Arm Holdings. However, Ecolab Inc is 3.54 times less risky than Arm Holdings. It trades about 0.08 of its potential returns per unit of risk. Arm Holdings plc is currently generating about -0.08 per unit of risk. If you would invest 24,573 in Ecolab Inc on September 1, 2024 and sell it today you would earn a total of 304.00 from holding Ecolab Inc or generate 1.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecolab Inc vs. Arm Holdings plc
Performance |
| Timeline |
| Ecolab Inc |
| Arm Holdings plc |
Ecolab and Arm Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and Arm Holdings
The main advantage of trading using opposite Ecolab and Arm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Arm Holdings 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 Arm Holdings will offset losses from the drop in Arm Holdings' long position.| Ecolab vs. Linde plc Ordinary | Ecolab vs. Air Products and | Ecolab vs. Aquagold International | Ecolab vs. Thrivent High Yield |
| Arm Holdings vs. ArcelorMittal SA ADR | Arm Holdings vs. Sanyo Special Steel | Arm Holdings vs. United States Steel | Arm Holdings vs. CECO Environmental Corp |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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