Correlation Between Ecolab and China Life

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

Diversification Opportunities for Ecolab and China Life

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Ecolab and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and China Life Insurance Company L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance 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 China Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of Ecolab i.e., Ecolab and China Life go up and down completely randomly.

Pair Corralation between Ecolab and China Life

Considering the 90-day investment horizon Ecolab Inc is expected to under-perform the China Life. In addition to that, Ecolab is 1.97 times more volatile than China Life Insurance. It trades about -0.11 of its total potential returns per unit of risk. China Life Insurance is currently generating about -0.03 per unit of volatility. If you would invest  691.00  in China Life Insurance on July 7, 2022 and sell it today you would lose (4.00)  from holding China Life Insurance or give up 0.58% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy57.14%
ValuesDaily Returns

Ecolab Inc  vs.  China Life Insurance Company L

 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

China Life Insurance 
China Performance
0 of 100
Over the last 90 days China Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, China Life is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Ecolab and China Life Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ecolab and China Life

The main advantage of trading using opposite Ecolab and China Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, China Life 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 China Life will offset losses from the drop in China Life's long position.
Ecolab vs. Amazon Inc
The idea behind Ecolab Inc and China Life Insurance 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.
China Life 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 ETF Directory module to find actively traded Exchange Traded Funds (ETF) from around the world.

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