Correlation Between Ecolab and Israel Acquisitions

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

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

Diversification Opportunities for Ecolab and Israel Acquisitions

-0.37

Correlation Coefficient

Ecolab  Israel Acquisitions

Very good diversification

The 3 months correlation between Ecolab and Israel is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Israel Acquisitions Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Israel Acquisitions 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 Israel Acquisitions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Israel Acquisitions Corp has no effect on the direction of Ecolab i.e., Ecolab and Israel Acquisitions go up and down completely randomly.

Pair Corralation between Ecolab and Israel Acquisitions

Considering the 90-day investment horizon Ecolab Inc is expected to under-perform the Israel Acquisitions. But the stock apears to be less risky and, when comparing its historical volatility, Ecolab Inc is 29.41 times less risky than Israel Acquisitions. The stock trades about -0.11 of its potential returns per unit of risk. The Israel Acquisitions Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3.09  in Israel Acquisitions Corp on September 29, 2024 and sell it today you would earn a total of  1.64  from holding Israel Acquisitions Corp or generate 53.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.08%
Values	Daily Returns

Ecolab Inc  vs.  Israel Acquisitions 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 latest unsteady performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Israel Acquisitions Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Israel Acquisitions Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Israel Acquisitions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecolab and Israel Acquisitions

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

The idea behind Ecolab Inc and Israel Acquisitions 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.