Correlation Between Ecolab and NetEase
Can any of the company-specific risk be diversified away by investing in both Ecolab and NetEase 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 NetEase into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and NetEase, you can compare the effects of market volatilities on Ecolab and NetEase 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 NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and NetEase.
Diversification Opportunities for Ecolab and NetEase
Average diversification
The 3 months correlation between Ecolab and NetEase is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase 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 NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of Ecolab i.e., Ecolab and NetEase go up and down completely randomly.
Pair Corralation between Ecolab and NetEase
Considering the 90-day investment horizon Ecolab Inc is expected to under-perform the NetEase. But the stock apears to be less risky and, when comparing its historical volatility, Ecolab Inc is 3.23 times less risky than NetEase. The stock trades about -0.09 of its potential returns per unit of risk. The NetEase is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 8,070 in NetEase on August 31, 2024 and sell it today you would earn a total of 586.00 from holding NetEase or generate 7.26% 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. NetEase
Performance |
| Timeline |
| Ecolab Inc |
| NetEase |
Ecolab and NetEase Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and NetEase
The main advantage of trading using opposite Ecolab and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, NetEase 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 NetEase will offset losses from the drop in NetEase's long position.| Ecolab vs. Linde plc Ordinary | Ecolab vs. PPG Industries | Ecolab vs. Sherwin Williams Co | Ecolab vs. LyondellBasell Industries NV |
| NetEase vs. Roblox Corp | NetEase vs. Skillz Platform | NetEase vs. Take Two Interactive Software | NetEase vs. Nintendo Co ADR |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |