Correlation Between Ecolab and Uber Technologies

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Can any of the company-specific risk be diversified away by investing in both Ecolab and Uber Technologies 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 Uber Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecolab Inc and Uber Technologies, you can compare the effects of market volatilities on Ecolab and Uber Technologies 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 Uber Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Uber Technologies.

Diversification Opportunities for Ecolab and Uber Technologies

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Ecolab and Uber Technologies is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of Ecolab i.e., Ecolab and Uber Technologies go up and down completely randomly.

Pair Corralation between Ecolab and Uber Technologies

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.64 times more return on investment than Uber Technologies. However, Ecolab Inc is 1.57 times less risky than Uber Technologies. It trades about 0.3 of its potential returns per unit of risk. Uber Technologies is currently generating about 0.02 per unit of risk. If you would invest  13,135  in Ecolab Inc on September 4, 2022 and sell it today you would earn a total of  2,001  from holding Ecolab Inc or generate 15.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Ecolab Inc  vs.  Uber Technologies

 Performance (%) 
       Timeline  
Ecolab Inc 
Ecolab Performance
0 of 100
Over the last 90 days Ecolab Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady fundamental indicators, Ecolab is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Ecolab Price Channel

Uber Technologies 
Uber Technologies Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Uber Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Uber Technologies is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Uber Technologies Price Channel

Ecolab and Uber Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ecolab and Uber Technologies

The main advantage of trading using opposite Ecolab and Uber Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Uber Technologies 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 Uber Technologies will offset losses from the drop in Uber Technologies' long position.
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The idea behind Ecolab Inc and Uber Technologies 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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Check out your portfolio center. 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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