Correlation Between Ecolab and G6 Materials

Can any of the company-specific risk be diversified away by investing in both Ecolab and G6 Materials 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 G6 Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ecolab Inc and G6 Materials Corp, you can compare the effects of market volatilities on Ecolab and G6 Materials 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 G6 Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and G6 Materials.

Diversification Opportunities for Ecolab and G6 Materials

0.14

Correlation Coefficient

Ecolab  G6 Materials

Average diversification

The 3 months correlation between Ecolab and GPHBF is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and G6 Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G6 Materials Corp 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 G6 Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G6 Materials Corp has no effect on the direction of Ecolab i.e., Ecolab and G6 Materials go up and down completely randomly.

Pair Corralation between Ecolab and G6 Materials

Considering the 90-day investment horizon Ecolab Inc is expected to under-perform the G6 Materials. But the stock apears to be less risky and, when comparing its historical volatility, Ecolab Inc is 12.78 times less risky than G6 Materials. The stock trades about -0.03 of its potential returns per unit of risk. The G6 Materials Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4.00  in G6 Materials Corp on September 13, 2024 and sell it today you would lose (1.17) from holding G6 Materials Corp or give up 29.25% of portfolio value over 90 days.

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

Ecolab Inc  vs.  G6 Materials Corp

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 current stock price mess, may contribute to short-term losses for the institutional investors.

G6 Materials Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G6 Materials Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, G6 Materials is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ecolab and G6 Materials

The main advantage of trading using opposite Ecolab and G6 Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, G6 Materials 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 G6 Materials will offset losses from the drop in G6 Materials' long position.

The idea behind Ecolab Inc and G6 Materials Corp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.