Correlation Between Ecolab and Exxon

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

Diversification Opportunities for Ecolab and Exxon

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Ecolab and Exxon is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Ecolab i.e., Ecolab and Exxon go up and down completely randomly.

Pair Corralation between Ecolab and Exxon

Considering the 90-day investment horizon Ecolab Inc is expected to generate 1.03 times more return on investment than Exxon. However, Ecolab is 1.03 times more volatile than Exxon Mobil Corp. It trades about -0.3 of its potential returns per unit of risk. Exxon Mobil Corp is currently generating about -0.33 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 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Ecolab Inc  vs.  Exxon Mobil 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 current stock price chaos, may contribute to medium-term losses for the stakeholders.

Ecolab Price Channel

Exxon Mobil Corp 
Exxon Performance
0 of 100
Over the last 90 days Exxon Mobil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Exxon is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Exxon Price Channel

Ecolab and Exxon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ecolab and Exxon

The main advantage of trading using opposite Ecolab and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.
Ecolab vs. Industrias Bachoco SA
The idea behind Ecolab Inc and Exxon Mobil 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.
Exxon vs. BUSHVELD MINERALS LTD
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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