Correlation Between Linde Plc and Ecolab
Can any of the company-specific risk be diversified away by investing in both Linde Plc and Ecolab 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 Linde Plc and Ecolab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Linde plc and Ecolab Inc, you can compare the effects of market volatilities on Linde Plc and Ecolab 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 Linde Plc with a short position of Ecolab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linde Plc and Ecolab.
Diversification Opportunities for Linde Plc and Ecolab
Poor diversification
The 3 months correlation between Linde and Ecolab is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Linde plc and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and Linde Plc 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 Linde plc are associated (or correlated) with Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of Linde Plc i.e., Linde Plc and Ecolab go up and down completely randomly.
Pair Corralation between Linde Plc and Ecolab
Assuming the 90 days horizon Linde Plc is expected to generate 1.06 times less return on investment than Ecolab. But when comparing it to its historical volatility, Linde plc is 1.39 times less risky than Ecolab. It trades about 0.09 of its potential returns per unit of risk. Ecolab Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 21,172 in Ecolab Inc on September 1, 2024 and sell it today you would earn a total of 2,228 from holding Ecolab Inc or generate 10.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.24% |
| Values | Daily Returns |
Linde plc vs. Ecolab Inc
Performance |
| Timeline |
| Linde plc |
| Ecolab Inc |
Linde Plc and Ecolab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Linde Plc and Ecolab
The main advantage of trading using opposite Linde Plc and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linde Plc position performs unexpectedly, Ecolab 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 Ecolab will offset losses from the drop in Ecolab's long position.| Linde Plc vs. VIRGIN WINES UK | Linde Plc vs. 24SEVENOFFICE GROUP AB | Linde Plc vs. VIVA WINE GROUP | Linde Plc vs. Molson Coors Beverage |
| Ecolab vs. The Sherwin Williams | Ecolab vs. SIKA AG UNSPADR | Ecolab vs. LyondellBasell Industries NV | Ecolab vs. Albemarle |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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