Correlation Between Ecolab and FEDEX

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

By analyzing existing cross correlation between Ecolab Inc and FEDEX P 51, you can compare the effects of market volatilities on Ecolab and FEDEX 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 FEDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and FEDEX.

Diversification Opportunities for Ecolab and FEDEX

0.01

Correlation Coefficient

Ecolab  FEDEX

Significant diversification

The 3 months correlation between Ecolab and FEDEX is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and FEDEX P 51 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEDEX P 51 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 FEDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEDEX P 51 has no effect on the direction of Ecolab i.e., Ecolab and FEDEX go up and down completely randomly.

Pair Corralation between Ecolab and FEDEX

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.55 times more return on investment than FEDEX. However, Ecolab Inc is 1.81 times less risky than FEDEX. It trades about -0.02 of its potential returns per unit of risk. FEDEX P 51 is currently generating about -0.1 per unit of risk. If you would invest  25,013  in Ecolab Inc on September 12, 2024 and sell it today you would lose (308.00) from holding Ecolab Inc or give up 1.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Ecolab Inc  vs.  FEDEX P 51

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.

FEDEX P 51

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FEDEX P 51 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for FEDEX P 51 investors.

Pair Trading with Ecolab and FEDEX

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

The idea behind Ecolab Inc and FEDEX P 51 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.