Correlation Between Ecolab and International Consolidated

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

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

Diversification Opportunities for Ecolab and International Consolidated

0.9

Correlation Coefficient

Ecolab  International Consolidated

Almost no diversification

The 3 months correlation between Ecolab and International is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated 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 International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of Ecolab i.e., Ecolab and International Consolidated go up and down completely randomly.

Pair Corralation between Ecolab and International Consolidated

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.37 times more return on investment than International Consolidated. However, Ecolab Inc is 2.68 times less risky than International Consolidated. It trades about 0.01 of its potential returns per unit of risk. International Consolidated Airlines is currently generating about -0.1 per unit of risk. If you would invest  26,136  in Ecolab Inc on March 19, 2025 and sell it today you would earn a total of  17.00  from holding Ecolab Inc or generate 0.07% return on investment over 90 days.

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

Ecolab Inc  vs.  International Consolidated Air

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.

International Consolidated

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, International Consolidated showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecolab and International Consolidated

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

The idea behind Ecolab Inc and International Consolidated Airlines 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.