Correlation Between Sable Offshore and Ecolab

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

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

Diversification Opportunities for Sable Offshore and Ecolab

-0.29

Correlation Coefficient

Sable Offshore  Ecolab

Very good diversification

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

Pair Corralation between Sable Offshore and Ecolab

Considering the 90-day investment horizon Sable Offshore Corp is expected to under-perform the Ecolab. In addition to that, Sable Offshore is 5.84 times more volatile than Ecolab Inc. It trades about -0.04 of its total potential returns per unit of risk. Ecolab Inc is currently generating about 0.0 per unit of volatility. 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

Sable Offshore Corp  vs.  Ecolab Inc

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.

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.

Pair Trading with Sable Offshore and Ecolab

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

The idea behind Sable Offshore Corp and Ecolab Inc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.