Correlation Between Ecolab and Vantage Drilling

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

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

Diversification Opportunities for Ecolab and Vantage Drilling

0.54

Correlation Coefficient

Ecolab  Vantage Drilling

Very weak diversification

The 3 months correlation between Ecolab and Vantage is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Vantage Drilling International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vantage Drilling Int 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 Vantage Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vantage Drilling Int has no effect on the direction of Ecolab i.e., Ecolab and Vantage Drilling go up and down completely randomly.

Pair Corralation between Ecolab and Vantage Drilling

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.18 times more return on investment than Vantage Drilling. However, Ecolab Inc is 5.58 times less risky than Vantage Drilling. It trades about 0.05 of its potential returns per unit of risk. Vantage Drilling International is currently generating about -0.01 per unit of risk. If you would invest  24,087  in Ecolab Inc on April 6, 2025 and sell it today you would earn a total of  3,322  from holding Ecolab Inc or generate 13.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Ecolab Inc  vs.  Vantage Drilling International

Ecolab Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Ecolab disclosed solid returns over the last few months and may actually be approaching a breakup point.

Vantage Drilling Int

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vantage Drilling International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vantage Drilling is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ecolab and Vantage Drilling

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

The idea behind Ecolab Inc and Vantage Drilling International 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.