Correlation Between Aquestive Therapeutics and Ecolab

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

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

Diversification Opportunities for Aquestive Therapeutics and Ecolab

0.31

Correlation Coefficient

Aquestive Therapeutics  Ecolab

Weak diversification

The 3 months correlation between Aquestive and Ecolab is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Aquestive Therapeutics and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and Aquestive Therapeutics 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 Aquestive Therapeutics 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 Aquestive Therapeutics i.e., Aquestive Therapeutics and Ecolab go up and down completely randomly.

Pair Corralation between Aquestive Therapeutics and Ecolab

Given the investment horizon of 90 days Aquestive Therapeutics is expected to generate 4.77 times more return on investment than Ecolab. However, Aquestive Therapeutics is 4.77 times more volatile than Ecolab Inc. It trades about 0.09 of its potential returns per unit of risk. Ecolab Inc is currently generating about 0.01 per unit of risk. If you would invest  419.00  in Aquestive Therapeutics on September 3, 2024 and sell it today you would earn a total of  90.00  from holding Aquestive Therapeutics or generate 21.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aquestive Therapeutics  vs.  Ecolab Inc

Aquestive Therapeutics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aquestive Therapeutics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Aquestive Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ecolab Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Ecolab is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Aquestive Therapeutics and Ecolab

The main advantage of trading using opposite Aquestive Therapeutics and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aquestive Therapeutics 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 Aquestive Therapeutics 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.