Correlation Between Ecolab and ATMOS

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

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

Diversification Opportunities for Ecolab and ATMOS

-0.06

Correlation Coefficient

Ecolab  ATMOS

Good diversification

The 3 months correlation between Ecolab and ATMOS is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and ATMOS ENERGY P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATMOS ENERGY P 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 ATMOS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATMOS ENERGY P has no effect on the direction of Ecolab i.e., Ecolab and ATMOS go up and down completely randomly.

Pair Corralation between Ecolab and ATMOS

Considering the 90-day investment horizon Ecolab Inc is expected to generate 1.3 times more return on investment than ATMOS. However, Ecolab is 1.3 times more volatile than ATMOS ENERGY P. It trades about 0.02 of its potential returns per unit of risk. ATMOS ENERGY P is currently generating about -0.03 per unit of risk. If you would invest  23,436  in Ecolab Inc on September 28, 2024 and sell it today you would earn a total of  340.00  from holding Ecolab Inc or generate 1.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	47.62%
Values	Daily Returns

Ecolab Inc  vs.  ATMOS ENERGY P

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.

ATMOS ENERGY P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATMOS ENERGY P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ATMOS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ecolab and ATMOS

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

The idea behind Ecolab Inc and ATMOS ENERGY P 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.