Correlation Between Ecolab and Kulicke

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

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

Diversification Opportunities for Ecolab and Kulicke

0.17

Correlation Coefficient

Ecolab  Kulicke

Average diversification

The 3 months correlation between Ecolab and Kulicke is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Kulicke and Soffa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kulicke and Soffa 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 Kulicke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kulicke and Soffa has no effect on the direction of Ecolab i.e., Ecolab and Kulicke go up and down completely randomly.

Pair Corralation between Ecolab and Kulicke

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.41 times more return on investment than Kulicke. However, Ecolab Inc is 2.42 times less risky than Kulicke. It trades about 0.13 of its potential returns per unit of risk. Kulicke and Soffa is currently generating about -0.04 per unit of risk. If you would invest  21,973  in Ecolab Inc on February 24, 2024 and sell it today you would earn a total of  1,340  from holding Ecolab Inc or generate 6.1% return on investment over 90 days.

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

Ecolab Inc  vs.  Kulicke and Soffa

Ecolab Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 10 (%) 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.

Kulicke and Soffa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kulicke and Soffa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Kulicke is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ecolab and Kulicke

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

The idea behind Ecolab Inc and Kulicke and Soffa 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.