Correlation Between Ecolab and Core Laboratories

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

Diversification Opportunities for Ecolab and Core Laboratories

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between Ecolab and Core Laboratories is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Core Laboratories NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Laboratories 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 Core Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Laboratories has no effect on the direction of Ecolab i.e., Ecolab and Core Laboratories go up and down completely randomly.

Pair Corralation between Ecolab and Core Laboratories

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.49 times more return on investment than Core Laboratories. However, Ecolab Inc is 2.05 times less risky than Core Laboratories. It trades about -0.23 of its potential returns per unit of risk. Core Laboratories NV is currently generating about -0.21 per unit of risk. If you would invest  16,164  in Ecolab Inc on July 4, 2022 and sell it today you would lose (1,722)  from holding Ecolab Inc or give up 10.65% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ecolab Inc  vs.  Core Laboratories NV

 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 latest conflicting performance, the Stock's fundamental indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Ecolab Price Channel

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

Core Laboratories Price Channel

Ecolab and Core Laboratories Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ecolab and Core Laboratories

The main advantage of trading using opposite Ecolab and Core Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Core Laboratories 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 Core Laboratories will offset losses from the drop in Core Laboratories' long position.
Ecolab vs. Amazon Inc
The idea behind Ecolab Inc and Core Laboratories NV 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.
Core Laboratories vs. Amazon Inc
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 Price Transformation module to use Price Transformation models to analyze depth of different equity instruments across global markets.

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