Correlation Between Ecolab and Ally Financial

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

Diversification Opportunities for Ecolab and Ally Financial

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Ecolab and Ally Financial is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial 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 Ally Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ally Financial has no effect on the direction of Ecolab i.e., Ecolab and Ally Financial go up and down completely randomly.

Pair Corralation between Ecolab and Ally Financial

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.85 times more return on investment than Ally Financial. However, Ecolab Inc is 1.18 times less risky than Ally Financial. It trades about -0.3 of its potential returns per unit of risk. Ally Financial is currently generating about -0.34 per unit of risk. If you would invest  17,094  in Ecolab Inc on June 26, 2022 and sell it today you would lose (2,168)  from holding Ecolab Inc or give up 12.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Ecolab Inc  vs.  Ally Financial

 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

Ally Financial 
Ally Financial Performance
0 of 100
Over the last 90 days Ally Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in October 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Ally Financial Price Channel

Ecolab and Ally Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ecolab and Ally Financial

The main advantage of trading using opposite Ecolab and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Ally Financial 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 Ally Financial will offset losses from the drop in Ally Financial's long position.
Ecolab vs. Industrias Bachoco SA
The idea behind Ecolab Inc and Ally Financial 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.
Ally Financial vs. Sigma Lithium Corp
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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