Correlation Between Ecolab and Cisco Systems

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

Diversification Opportunities for Ecolab and Cisco Systems

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Ecolab and Cisco is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems 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 Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of Ecolab i.e., Ecolab and Cisco Systems go up and down completely randomly.

Pair Corralation between Ecolab and Cisco Systems

Considering the 90-day investment horizon Ecolab Inc is expected to under-perform the Cisco Systems. In addition to that, Ecolab is 1.14 times more volatile than Cisco Systems. It trades about -0.15 of its total potential returns per unit of risk. Cisco Systems is currently generating about -0.14 per unit of volatility. If you would invest  4,528  in Cisco Systems on July 2, 2022 and sell it today you would lose (471.00)  from holding Cisco Systems or give up 10.4% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Ecolab Inc  vs.  Cisco Systems

 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

Cisco Systems 
Cisco Performance
0 of 100
Over the last 90 days Cisco Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Cisco Systems is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Cisco Price Channel

Ecolab and Cisco Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ecolab and Cisco Systems

The main advantage of trading using opposite Ecolab and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Cisco Systems 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 Cisco Systems will offset losses from the drop in Cisco Systems' long position.
Ecolab vs. Amazon Inc
The idea behind Ecolab Inc and Cisco Systems 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.
Cisco Systems 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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