Correlation Between Armada Hflr and Ecolab

Can any of the company-specific risk be diversified away by investing in both Armada Hflr 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 Armada Hflr and Ecolab into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Armada Hflr Pr and Ecolab Inc, you can compare the effects of market volatilities on Armada Hflr 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 Armada Hflr with a short position of Ecolab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hflr and Ecolab.

Diversification Opportunities for Armada Hflr and Ecolab

-0.76

Correlation Coefficient

Armada Hflr  Ecolab

Pay attention - limited upside

The 3 months correlation between Armada and Ecolab is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and Armada Hflr 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 Armada Hflr Pr 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 Armada Hflr i.e., Armada Hflr and Ecolab go up and down completely randomly.

Pair Corralation between Armada Hflr and Ecolab

Considering the 90-day investment horizon Armada Hflr Pr is expected to under-perform the Ecolab. In addition to that, Armada Hflr is 22.23 times more volatile than Ecolab Inc. It trades about -0.33 of its total potential returns per unit of risk. Ecolab Inc is currently generating about 0.22 per unit of volatility. If you would invest  493,137  in Ecolab Inc on September 27, 2024 and sell it today you would earn a total of  1,316  from holding Ecolab Inc or generate 0.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Armada Hflr Pr  vs.  Ecolab Inc

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Ecolab Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Ecolab is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Armada Hflr and Ecolab

The main advantage of trading using opposite Armada Hflr and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr 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.

The idea behind Armada Hflr Pr and Ecolab Inc 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.