Correlation Between Ecolab and Skillful Craftsman

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

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

Diversification Opportunities for Ecolab and Skillful Craftsman

0.24

Correlation Coefficient

Ecolab  Skillful Craftsman

Modest diversification

The 3 months correlation between Ecolab and Skillful is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Skillful Craftsman Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skillful Craftsman and Ecolab 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 Ecolab Inc are associated (or correlated) with Skillful Craftsman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skillful Craftsman has no effect on the direction of Ecolab i.e., Ecolab and Skillful Craftsman go up and down completely randomly.

Pair Corralation between Ecolab and Skillful Craftsman

Considering the 90-day investment horizon Ecolab Inc is expected to under-perform the Skillful Craftsman. But the stock apears to be less risky and, when comparing its historical volatility, Ecolab Inc is 3.82 times less risky than Skillful Craftsman. The stock trades about -0.11 of its potential returns per unit of risk. The Skillful Craftsman Education is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  100.00  in Skillful Craftsman Education on September 27, 2024 and sell it today you would earn a total of  2.00  from holding Skillful Craftsman Education or generate 2.0% return on investment over 90 days.

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

Ecolab Inc  vs.  Skillful Craftsman Education

Ecolab Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecolab Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Ecolab is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Skillful Craftsman

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skillful Craftsman Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Skillful Craftsman is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ecolab and Skillful Craftsman

The main advantage of trading using opposite Ecolab and Skillful Craftsman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Skillful Craftsman 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 Skillful Craftsman will offset losses from the drop in Skillful Craftsman's long position.

The idea behind Ecolab Inc and Skillful Craftsman Education 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.