Correlation Between Ecolab and Knife River
Can any of the company-specific risk be diversified away by investing in both Ecolab and Knife River 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 Knife River into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and Knife River, you can compare the effects of market volatilities on Ecolab and Knife River 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 Knife River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Knife River.
Diversification Opportunities for Ecolab and Knife River
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ecolab and Knife is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Knife River in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knife River 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 Knife River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knife River has no effect on the direction of Ecolab i.e., Ecolab and Knife River go up and down completely randomly.
Pair Corralation between Ecolab and Knife River
Considering the 90-day investment horizon Ecolab is expected to generate 2.55 times less return on investment than Knife River. But when comparing it to its historical volatility, Ecolab Inc is 1.83 times less risky than Knife River. It trades about 0.1 of its potential returns per unit of risk. Knife River is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,551 in Knife River on September 14, 2024 and sell it today you would earn a total of 7,022 from holding Knife River or generate 197.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 78.74% |
| Values | Daily Returns |
Ecolab Inc vs. Knife River
Performance |
| Timeline |
| Ecolab Inc |
| Knife River |
Ecolab and Knife River Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and Knife River
The main advantage of trading using opposite Ecolab and Knife River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Knife River 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 Knife River will offset losses from the drop in Knife River's long position.| Ecolab vs. LyondellBasell Industries NV | Ecolab vs. Cabot | Ecolab vs. Westlake Chemical | Ecolab vs. Air Products and |
| Knife River vs. Sphere Entertainment Co | Knife River vs. Weibo Corp | Knife River vs. Radcom | Knife River vs. Plexus 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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