Correlation Between Performance Food and Ecolab
Can any of the company-specific risk be diversified away by investing in both Performance Food 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 Performance Food and Ecolab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Performance Food Group and Ecolab Inc, you can compare the effects of market volatilities on Performance Food 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 Performance Food with a short position of Ecolab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Performance Food and Ecolab.
Diversification Opportunities for Performance Food and Ecolab
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Performance and Ecolab is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and Performance Food 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 Performance Food Group 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 Performance Food i.e., Performance Food and Ecolab go up and down completely randomly.
Pair Corralation between Performance Food and Ecolab
Assuming the 90 days trading horizon Performance Food is expected to generate 1.28 times less return on investment than Ecolab. In addition to that, Performance Food is 1.15 times more volatile than Ecolab Inc. It trades about 0.06 of its total potential returns per unit of risk. Ecolab Inc is currently generating about 0.08 per unit of volatility. If you would invest 13,946 in Ecolab Inc on September 3, 2024 and sell it today you would earn a total of 9,394 from holding Ecolab Inc or generate 67.36% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Performance Food Group vs. Ecolab Inc
Performance |
Timeline |
Performance Food |
Ecolab Inc |
Performance Food and Ecolab Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Performance Food and Ecolab
The main advantage of trading using opposite Performance Food and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Performance Food 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.Performance Food vs. China BlueChemical | Performance Food vs. AIR PRODCHEMICALS | Performance Food vs. Siamgas And Petrochemicals | Performance Food vs. Sanyo Chemical Industries |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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