Correlation Between Ecolab and Ferrari NV
Can any of the company-specific risk be diversified away by investing in both Ecolab and Ferrari NV 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 Ferrari NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and Ferrari NV, you can compare the effects of market volatilities on Ecolab and Ferrari NV 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 Ferrari NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Ferrari NV.
Diversification Opportunities for Ecolab and Ferrari NV
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ecolab and Ferrari is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Ferrari NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrari NV 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 Ferrari NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrari NV has no effect on the direction of Ecolab i.e., Ecolab and Ferrari NV go up and down completely randomly.
Pair Corralation between Ecolab and Ferrari NV
Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.93 times more return on investment than Ferrari NV. However, Ecolab Inc is 1.07 times less risky than Ferrari NV. It trades about 0.35 of its potential returns per unit of risk. Ferrari NV is currently generating about 0.12 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecolab Inc vs. Ferrari NV
Performance |
| Timeline |
| Ecolab Inc |
| Ferrari NV |
Ecolab and Ferrari NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and Ferrari NV
The main advantage of trading using opposite Ecolab and Ferrari NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Ferrari NV 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 Ferrari NV will offset losses from the drop in Ferrari NV's long position.| Ecolab vs. Linde plc Ordinary | Ecolab vs. PPG Industries | Ecolab vs. Sherwin Williams Co | Ecolab vs. LyondellBasell Industries NV |
| Ferrari NV vs. Volkswagen AG Pref | Ferrari NV vs. Volkswagen AG 110 | Ferrari NV vs. Porsche Automobil Holding | Ferrari NV vs. Toyota Motor |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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