Correlation Between Ecolab and Boston Beer
Can any of the company-specific risk be diversified away by investing in both Ecolab and Boston Beer 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 Boston Beer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and Boston Beer, you can compare the effects of market volatilities on Ecolab and Boston Beer 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 Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Boston Beer.
Diversification Opportunities for Ecolab and Boston Beer
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ecolab and Boston is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer 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 Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Ecolab i.e., Ecolab and Boston Beer go up and down completely randomly.
Pair Corralation between Ecolab and Boston Beer
Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.72 times more return on investment than Boston Beer. However, Ecolab Inc is 1.38 times less risky than Boston Beer. It trades about 0.05 of its potential returns per unit of risk. Boston Beer is currently generating about 0.03 per unit of risk. If you would invest 23,185 in Ecolab Inc on September 1, 2024 and sell it today you would earn a total of 1,692 from holding Ecolab Inc or generate 7.3% 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. Boston Beer
Performance |
| Timeline |
| Ecolab Inc |
| Boston Beer |
Ecolab and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and Boston Beer
The main advantage of trading using opposite Ecolab and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Boston Beer 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 Boston Beer will offset losses from the drop in Boston Beer's long position.| Ecolab vs. Linde plc Ordinary | Ecolab vs. Air Products and | Ecolab vs. Aquagold International | Ecolab vs. Thrivent High Yield |
| Boston Beer vs. Anheuser Busch Inbev | Boston Beer vs. Molson Coors Beverage | Boston Beer vs. Heineken NV | Boston Beer vs. Ambev SA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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