Correlation Between Ferrari NV and Ecolab
Can any of the company-specific risk be diversified away by investing in both Ferrari NV 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 Ferrari NV and Ecolab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferrari NV and Ecolab Inc, you can compare the effects of market volatilities on Ferrari NV 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 Ferrari NV with a short position of Ecolab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferrari NV and Ecolab.
Diversification Opportunities for Ferrari NV and Ecolab
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ferrari and Ecolab is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ferrari NV and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and Ferrari NV 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 Ferrari NV 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 Ferrari NV i.e., Ferrari NV and Ecolab go up and down completely randomly.
Pair Corralation between Ferrari NV and Ecolab
Given the investment horizon of 90 days Ferrari NV is expected to generate 2.79 times less return on investment than Ecolab. In addition to that, Ferrari NV is 1.07 times more volatile than Ecolab Inc. It trades about 0.12 of its total potential returns per unit of risk. Ecolab Inc is currently generating about 0.35 per unit of volatility. If you would invest 23,193 in Ecolab Inc on November 4, 2024 and sell it today you would earn a total of 1,826 from holding Ecolab Inc or generate 7.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ferrari NV vs. Ecolab Inc
Performance |
| Timeline |
| Ferrari NV |
| Ecolab Inc |
Ferrari NV and Ecolab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ferrari NV and Ecolab
The main advantage of trading using opposite Ferrari NV and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferrari NV 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.| Ferrari NV vs. Volkswagen AG Pref | Ferrari NV vs. Volkswagen AG 110 | Ferrari NV vs. Porsche Automobil Holding | Ferrari NV vs. Toyota Motor |
| Ecolab vs. Linde plc Ordinary | Ecolab vs. PPG Industries | Ecolab vs. Sherwin Williams Co | Ecolab vs. LyondellBasell Industries NV |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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