Correlation Between Ecolab and Albemarle Corp

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

Diversification Opportunities for Ecolab and Albemarle Corp

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Ecolab and Albemarle is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Albemarle Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle Corp 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 Albemarle Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle Corp has no effect on the direction of Ecolab i.e., Ecolab and Albemarle Corp go up and down completely randomly.

Pair Corralation between Ecolab and Albemarle Corp

Considering the 90-day investment horizon Ecolab Inc is expected to under-perform the Albemarle Corp. But the stock apears to be less risky and, when comparing its historical volatility, Ecolab Inc is 1.81 times less risky than Albemarle Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Albemarle Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9,374  in Albemarle Corp on June 26, 2022 and sell it today you would earn a total of  17,571  from holding Albemarle Corp or generate 187.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Ecolab Inc  vs.  Albemarle Corp

 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 current stock price chaos, may contribute to medium-term losses for the stakeholders.

Ecolab Price Channel

Albemarle Corp 
Albemarle Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Albemarle Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Albemarle Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Albemarle Price Channel

Ecolab and Albemarle Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ecolab and Albemarle Corp

The main advantage of trading using opposite Ecolab and Albemarle Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Albemarle Corp 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 Albemarle Corp will offset losses from the drop in Albemarle Corp's long position.
Ecolab vs. Industrias Bachoco SA
The idea behind Ecolab Inc and Albemarle Corp 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.
Albemarle Corp vs. Industrias Bachoco SA
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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