Correlation Between Ecolab and VirnetX Holding
Can any of the company-specific risk be diversified away by investing in both Ecolab and VirnetX Holding 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 VirnetX Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and VirnetX Holding Corp, you can compare the effects of market volatilities on Ecolab and VirnetX Holding 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 VirnetX Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and VirnetX Holding.
Diversification Opportunities for Ecolab and VirnetX Holding
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ecolab and VirnetX is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and VirnetX Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VirnetX Holding Corp 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 VirnetX Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VirnetX Holding Corp has no effect on the direction of Ecolab i.e., Ecolab and VirnetX Holding go up and down completely randomly.
Pair Corralation between Ecolab and VirnetX Holding
Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.31 times more return on investment than VirnetX Holding. However, Ecolab Inc is 3.27 times less risky than VirnetX Holding. It trades about -0.18 of its potential returns per unit of risk. VirnetX Holding Corp is currently generating about -0.23 per unit of risk. If you would invest 25,645 in Ecolab Inc on August 28, 2024 and sell it today you would lose (953.00) from holding Ecolab Inc or give up 3.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ecolab Inc vs. VirnetX Holding Corp
Performance |
| Timeline |
| Ecolab Inc |
| VirnetX Holding Corp |
Ecolab and VirnetX Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecolab and VirnetX Holding
The main advantage of trading using opposite Ecolab and VirnetX Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, VirnetX Holding 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 VirnetX Holding will offset losses from the drop in VirnetX Holding's long position.The idea behind Ecolab Inc and VirnetX Holding Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| VirnetX Holding vs. GigaCloud Technology Class | VirnetX Holding vs. Telos Corp | VirnetX Holding vs. Cemtrex | VirnetX Holding vs. authID Inc |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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