Correlation Between Ecolab and NETGEAR
Can any of the company-specific risk be diversified away by investing in both Ecolab and NETGEAR 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 NETGEAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and NETGEAR, you can compare the effects of market volatilities on Ecolab and NETGEAR 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 NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and NETGEAR.
Diversification Opportunities for Ecolab and NETGEAR
Good diversification
The 3 months correlation between Ecolab and NETGEAR is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Ecolab i.e., Ecolab and NETGEAR go up and down completely randomly.
Pair Corralation between Ecolab and NETGEAR
Considering the 90-day investment horizon Ecolab Inc is expected to under-perform the NETGEAR. But the stock apears to be less risky and, when comparing its historical volatility, Ecolab Inc is 2.6 times less risky than NETGEAR. The stock trades about -0.07 of its potential returns per unit of risk. The NETGEAR is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,006 in NETGEAR on August 31, 2024 and sell it today you would earn a total of 398.00 from holding NETGEAR or generate 19.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecolab Inc vs. NETGEAR
Performance |
| Timeline |
| Ecolab Inc |
| NETGEAR |
Ecolab and NETGEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and NETGEAR
The main advantage of trading using opposite Ecolab and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, NETGEAR 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 NETGEAR will offset losses from the drop in NETGEAR's long position.| Ecolab vs. Linde plc Ordinary | Ecolab vs. PPG Industries | Ecolab vs. Sherwin Williams Co | Ecolab vs. LyondellBasell Industries NV |
| NETGEAR vs. KVH Industries | NETGEAR vs. Ituran Location and | NETGEAR vs. Aviat Networks | NETGEAR vs. Mynaric AG 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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