Correlation Between Ecolab and Magna International
Can any of the company-specific risk be diversified away by investing in both Ecolab and Magna International 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 Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and Magna International, you can compare the effects of market volatilities on Ecolab and Magna International 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 Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Magna International.
Diversification Opportunities for Ecolab and Magna International
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ecolab and Magna is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of Ecolab i.e., Ecolab and Magna International go up and down completely randomly.
Pair Corralation between Ecolab and Magna International
Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.62 times more return on investment than Magna International. However, Ecolab Inc is 1.6 times less risky than Magna International. It trades about 0.35 of its potential returns per unit of risk. Magna International is currently generating about -0.1 per unit of risk. If you would invest 23,193 in Ecolab Inc on November 4, 2024 and sell it today you would earn a total of 1,826 from holding Ecolab Inc or generate 7.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecolab Inc vs. Magna International
Performance |
| Timeline |
| Ecolab Inc |
| Magna International |
Ecolab and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and Magna International
The main advantage of trading using opposite Ecolab and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Magna International 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 Magna International will offset losses from the drop in Magna International's long position.| Ecolab vs. Linde plc Ordinary | Ecolab vs. PPG Industries | Ecolab vs. Sherwin Williams Co | Ecolab vs. LyondellBasell Industries NV |
| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |