Correlation Between Ecolab and Sable Offshore

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

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

Diversification Opportunities for Ecolab and Sable Offshore

-0.29

Correlation Coefficient

Ecolab  Sable Offshore

Very good diversification

The 3 months correlation between Ecolab and Sable is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Sable Offshore Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sable Offshore 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 Sable Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sable Offshore Corp has no effect on the direction of Ecolab i.e., Ecolab and Sable Offshore go up and down completely randomly.

Pair Corralation between Ecolab and Sable Offshore

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.17 times more return on investment than Sable Offshore. However, Ecolab Inc is 5.84 times less risky than Sable Offshore. It trades about 0.0 of its potential returns per unit of risk. Sable Offshore Corp is currently generating about -0.04 per unit of risk. If you would invest  25,046  in Ecolab Inc on September 17, 2024 and sell it today you would lose (26.00) from holding Ecolab Inc or give up 0.1% of portfolio value over 90 days.

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

Ecolab Inc  vs.  Sable Offshore 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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Sable Offshore Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sable Offshore Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ecolab and Sable Offshore

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

The idea behind Ecolab Inc and Sable Offshore 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.