Correlation Between Ecolab and Level 3

Can any of the company-specific risk be diversified away by investing in both Ecolab and Level 3 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 Level 3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ecolab Inc and Level 3 Communications, you can compare the effects of market volatilities on Ecolab and Level 3 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 Level 3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and Level 3.

Diversification Opportunities for Ecolab and Level 3

0.0

Correlation Coefficient

Ecolab  Level 3

Pay attention - limited upside

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

Pair Corralation between Ecolab and Level 3

If you would invest  22,679  in Ecolab Inc on February 6, 2024 and sell it today you would earn a total of  71.00  from holding Ecolab Inc or generate 0.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Ecolab Inc  vs.  Level 3 Communications

Ecolab Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Ecolab disclosed solid returns over the last few months and may actually be approaching a breakup point.

Level 3 Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Level 3 Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Level 3 is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ecolab and Level 3

The main advantage of trading using opposite Ecolab and Level 3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, Level 3 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 Level 3 will offset losses from the drop in Level 3's long position.

The idea behind Ecolab Inc and Level 3 Communications 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.

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 the Technical Analysis module to check basic technical indicators and analysis based on most latest market data.