Correlation Between Waste Management and Ecolab
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and Ecolab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Ecolab Inc, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of Ecolab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Ecolab.
Diversification Opportunities for Waste Management and Ecolab
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Waste and Ecolab is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Ecolab go up and down completely randomly.
Pair Corralation between Waste Management and Ecolab
Allowing for the 90-day total investment horizon Waste Management is expected to generate 1.48 times less return on investment than Ecolab. But when comparing it to its historical volatility, Waste Management is 1.15 times less risky than Ecolab. It trades about 0.07 of its potential returns per unit of risk. Ecolab Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 14,924 in Ecolab Inc on September 3, 2024 and sell it today you would earn a total of 9,953 from holding Ecolab Inc or generate 66.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. Ecolab Inc
Performance |
| Timeline |
| Waste Management |
| Ecolab Inc |
Waste Management and Ecolab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Ecolab
The main advantage of trading using opposite Waste Management and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. Waste Connections | Waste Management vs. Clean Harbors | Waste Management vs. Casella Waste Systems | Waste Management vs. Gfl Environmental Holdings |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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