Correlation Between Tokyo Electron and Ecolab

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

By analyzing existing cross correlation between Tokyo Electron and Ecolab Inc, you can compare the effects of market volatilities on Tokyo Electron and Ecolab 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 Tokyo Electron with a short position of Ecolab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tokyo Electron and Ecolab.

Diversification Opportunities for Tokyo Electron and Ecolab

0.59

Correlation Coefficient

Tokyo Electron  Ecolab

Very weak diversification

The 3 months correlation between Tokyo and Ecolab is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Tokyo Electron and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and Tokyo Electron 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 Tokyo Electron are associated (or correlated) with Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of Tokyo Electron i.e., Tokyo Electron and Ecolab go up and down completely randomly.

Pair Corralation between Tokyo Electron and Ecolab

Assuming the 90 days horizon Tokyo Electron is expected to generate 4.7 times more return on investment than Ecolab. However, Tokyo Electron is 4.7 times more volatile than Ecolab Inc. It trades about 0.06 of its potential returns per unit of risk. Ecolab Inc is currently generating about 0.05 per unit of risk. If you would invest  13,986  in Tokyo Electron on May 3, 2025 and sell it today you would earn a total of  1,726  from holding Tokyo Electron or generate 12.34% return on investment over 90 days.

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

Tokyo Electron  vs.  Ecolab Inc

Tokyo Electron

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyo Electron are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Tokyo Electron reported solid returns over the last few months and may actually be approaching a breakup point.

Ecolab Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 3 (%) 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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Tokyo Electron and Ecolab

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

The idea behind Tokyo Electron and Ecolab Inc 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.