Correlation Between Ecolab and Definitive Healthcare

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

Diversification Opportunities for Ecolab and Definitive Healthcare

0.34
  Correlation Coefficient

Weak diversification

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

Pair Corralation between Ecolab and Definitive Healthcare

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.74 times more return on investment than Definitive Healthcare. However, Ecolab Inc is 1.35 times less risky than Definitive Healthcare. It trades about -0.1 of its potential returns per unit of risk. Definitive Healthcare Corp is currently generating about -0.19 per unit of risk. If you would invest  16,303  in Ecolab Inc on July 6, 2022 and sell it today you would lose (894.00)  from holding Ecolab Inc or give up 5.48% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ecolab Inc  vs.  Definitive Healthcare 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 latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Ecolab Price Channel

Definitive Healthcare 
Definitive Performance
0 of 100
Over the last 90 days Definitive Healthcare Corp 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 technical indicators remain nearly stable which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Definitive Price Channel

Ecolab and Definitive Healthcare Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ecolab and Definitive Healthcare

The main advantage of trading using opposite Ecolab and Definitive Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Definitive Healthcare 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 Definitive Healthcare will offset losses from the drop in Definitive Healthcare's long position.
Ecolab vs. Amazon Inc
The idea behind Ecolab Inc and Definitive Healthcare 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.
Definitive Healthcare 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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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