Correlation Between Ecolab and Steven Madden
Can any of the company-specific risk be diversified away by investing in both Ecolab and Steven Madden 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 Steven Madden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and Steven Madden, you can compare the effects of market volatilities on Ecolab and Steven Madden 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 Steven Madden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Steven Madden.
Diversification Opportunities for Ecolab and Steven Madden
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ecolab and Steven is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden 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 Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of Ecolab i.e., Ecolab and Steven Madden go up and down completely randomly.
Pair Corralation between Ecolab and Steven Madden
Considering the 90-day investment horizon Ecolab Inc is expected to under-perform the Steven Madden. But the stock apears to be less risky and, when comparing its historical volatility, Ecolab Inc is 2.91 times less risky than Steven Madden. The stock trades about -0.14 of its potential returns per unit of risk. The Steven Madden is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 4,483 in Steven Madden on September 12, 2024 and sell it today you would lose (82.00) from holding Steven Madden or give up 1.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecolab Inc vs. Steven Madden
Performance |
| Timeline |
| Ecolab Inc |
| Steven Madden |
Ecolab and Steven Madden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and Steven Madden
The main advantage of trading using opposite Ecolab and Steven Madden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Steven Madden 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 Steven Madden will offset losses from the drop in Steven Madden's long position.| Ecolab vs. Linde plc Ordinary | Ecolab vs. PPG Industries | Ecolab vs. Sherwin Williams Co | Ecolab vs. LyondellBasell Industries NV |
| Steven Madden vs. Weyco Group | Steven Madden vs. Caleres | Steven Madden vs. Rocky Brands | Steven Madden vs. Designer Brands |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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