Correlation Between Ecolab and Victrex Plc

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

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

Diversification Opportunities for Ecolab and Victrex Plc

0.51

Correlation Coefficient

Ecolab  Victrex Plc

Very weak diversification

The 3 months correlation between Ecolab and Victrex is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Victrex plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victrex plc 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 Victrex Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victrex plc has no effect on the direction of Ecolab i.e., Ecolab and Victrex Plc go up and down completely randomly.

Pair Corralation between Ecolab and Victrex Plc

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.41 times more return on investment than Victrex Plc. However, Ecolab Inc is 2.46 times less risky than Victrex Plc. It trades about 0.02 of its potential returns per unit of risk. Victrex plc is currently generating about 0.0 per unit of risk. If you would invest  23,436  in Ecolab Inc on September 27, 2024 and sell it today you would earn a total of  491.00  from holding Ecolab Inc or generate 2.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Ecolab Inc  vs.  Victrex plc

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

Victrex plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Victrex plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Victrex Plc 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 Victrex Plc

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

The idea behind Ecolab Inc and Victrex plc 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.