Correlation Between Ecolab and Sherwin Williams

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

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

Diversification Opportunities for Ecolab and Sherwin Williams

0.87

Correlation Coefficient

Ecolab  Sherwin Williams

Very poor diversification

The 3 months correlation between Ecolab and Sherwin is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Sherwin Williams Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sherwin Williams 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 Sherwin Williams. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sherwin Williams has no effect on the direction of Ecolab i.e., Ecolab and Sherwin Williams go up and down completely randomly.

Pair Corralation between Ecolab and Sherwin Williams

Considering the 90-day investment horizon Ecolab Inc is expected to generate 1.03 times more return on investment than Sherwin Williams. However, Ecolab is 1.03 times more volatile than Sherwin Williams Co. It trades about 0.21 of its potential returns per unit of risk. Sherwin Williams Co is currently generating about 0.18 per unit of risk. If you would invest  15,829  in Ecolab Inc on January 20, 2024 and sell it today you would earn a total of  6,092  from holding Ecolab Inc or generate 38.49% return on investment over 90 days.

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

Ecolab Inc  vs.  Sherwin Williams Co

Ecolab Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent fundamental indicators, Ecolab may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Sherwin Williams

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sherwin Williams Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical indicators, Sherwin Williams is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ecolab and Sherwin Williams

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

The idea behind Ecolab Inc and Sherwin Williams Co 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.