Correlation Between Ecolab and Perimeter Solutions

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

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

Diversification Opportunities for Ecolab and Perimeter Solutions

0.57

Correlation Coefficient

Ecolab  Perimeter Solutions

Very weak diversification

The 3 months correlation between Ecolab and Perimeter is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Perimeter Solutions SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perimeter Solutions 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 Perimeter Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perimeter Solutions has no effect on the direction of Ecolab i.e., Ecolab and Perimeter Solutions go up and down completely randomly.

Pair Corralation between Ecolab and Perimeter Solutions

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.3 times more return on investment than Perimeter Solutions. However, Ecolab Inc is 3.34 times less risky than Perimeter Solutions. It trades about -0.27 of its potential returns per unit of risk. Perimeter Solutions SA is currently generating about -0.1 per unit of risk. If you would invest  25,919  in Ecolab Inc on August 20, 2024 and sell it today you would lose (1,395) from holding Ecolab Inc or give up 5.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ecolab Inc  vs.  Perimeter Solutions SA

Ecolab Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Ecolab is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Perimeter Solutions

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Perimeter Solutions SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Perimeter Solutions displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecolab and Perimeter Solutions

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

The idea behind Ecolab Inc and Perimeter Solutions SA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.