Correlation Between Ecolab and Bank of America
Can any of the company-specific risk be diversified away by investing in both Ecolab and Bank of America 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 Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and Bank of America, you can compare the effects of market volatilities on Ecolab and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Bank of America.
Diversification Opportunities for Ecolab and Bank of America
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ecolab and Bank is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Ecolab i.e., Ecolab and Bank of America go up and down completely randomly.
Pair Corralation between Ecolab and Bank of America
Considering the 90-day investment horizon Ecolab Inc is expected to generate 2.76 times more return on investment than Bank of America. However, Ecolab is 2.76 times more volatile than Bank of America. It trades about 0.21 of its potential returns per unit of risk. Bank of America is currently generating about 0.02 per unit of risk. If you would invest 24,952 in Ecolab Inc on November 29, 2024 and sell it today you would earn a total of 1,695 from holding Ecolab Inc or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecolab Inc vs. Bank of America
Performance |
| Timeline |
| Ecolab Inc |
| Bank of America |
Ecolab and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and Bank of America
The main advantage of trading using opposite Ecolab and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Ecolab vs. Linde plc Ordinary | Ecolab vs. PPG Industries | Ecolab vs. Sherwin Williams Co | Ecolab vs. LyondellBasell Industries NV |
| Bank of America vs. Bank of America | Bank of America vs. Wells Fargo | Bank of America vs. Bank of America | Bank of America vs. China Construction Bank |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |