Correlation Between Ecolab and Canopy Growth
Can any of the company-specific risk be diversified away by investing in both Ecolab and Canopy Growth 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 Canopy Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and Canopy Growth Corp, you can compare the effects of market volatilities on Ecolab and Canopy Growth 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 Canopy Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Canopy Growth.
Diversification Opportunities for Ecolab and Canopy Growth
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ecolab and Canopy is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Canopy Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canopy Growth Corp 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 Canopy Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canopy Growth Corp has no effect on the direction of Ecolab i.e., Ecolab and Canopy Growth go up and down completely randomly.
Pair Corralation between Ecolab and Canopy Growth
Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.24 times more return on investment than Canopy Growth. However, Ecolab Inc is 4.11 times less risky than Canopy Growth. It trades about 0.05 of its potential returns per unit of risk. Canopy Growth Corp is currently generating about -0.09 per unit of risk. If you would invest 23,185 in Ecolab Inc on September 1, 2024 and sell it today you would earn a total of 1,692 from holding Ecolab Inc or generate 7.3% 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. Canopy Growth Corp
Performance |
| Timeline |
| Ecolab Inc |
| Canopy Growth Corp |
Ecolab and Canopy Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and Canopy Growth
The main advantage of trading using opposite Ecolab and Canopy Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Canopy Growth 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 Canopy Growth will offset losses from the drop in Canopy Growth's long position.| Ecolab vs. Linde plc Ordinary | Ecolab vs. Air Products and | Ecolab vs. Aquagold International | Ecolab vs. Thrivent High Yield |
| Canopy Growth vs. Crinetics Pharmaceuticals | Canopy Growth vs. Enanta Pharmaceuticals | Canopy Growth vs. Amicus Therapeutics | Canopy Growth vs. Connect Biopharma Holdings |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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