Correlation Between Ecolab and Cebu Air
Can any of the company-specific risk be diversified away by investing in both Ecolab and Cebu Air 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 Cebu Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and Cebu Air ADR, you can compare the effects of market volatilities on Ecolab and Cebu Air 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 Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Cebu Air.
Diversification Opportunities for Ecolab and Cebu Air
Poor diversification
The 3 months correlation between Ecolab and Cebu is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Cebu Air ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air ADR 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 Cebu Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cebu Air ADR has no effect on the direction of Ecolab i.e., Ecolab and Cebu Air go up and down completely randomly.
Pair Corralation between Ecolab and Cebu Air
Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.39 times more return on investment than Cebu Air. However, Ecolab Inc is 2.56 times less risky than Cebu Air. It trades about 0.09 of its potential returns per unit of risk. Cebu Air ADR is currently generating about -0.02 per unit of risk. If you would invest 14,708 in Ecolab Inc on September 2, 2024 and sell it today you would earn a total of 10,169 from holding Ecolab Inc or generate 69.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Ecolab Inc vs. Cebu Air ADR
Performance |
| Timeline |
| Ecolab Inc |
| Cebu Air ADR |
Ecolab and Cebu Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and Cebu Air
The main advantage of trading using opposite Ecolab and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Cebu Air 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 Cebu Air will offset losses from the drop in Cebu Air's long position.| Ecolab vs. Linde plc Ordinary | Ecolab vs. Air Products and | Ecolab vs. Aquagold International | Ecolab vs. Thrivent High Yield |
| Cebu Air vs. Fidus Investment Corp | Cebu Air vs. 51Talk Online Education | Cebu Air vs. Nexstar Broadcasting Group | Cebu Air vs. Evolution Gaming Group |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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