Correlation Between Micron Technology and Ecolab
Can any of the company-specific risk be diversified away by investing in both Micron Technology 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 Micron Technology and Ecolab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Micron Technology and Ecolab Inc, you can compare the effects of market volatilities on Micron Technology 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 Micron Technology with a short position of Ecolab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and Ecolab.
Diversification Opportunities for Micron Technology and Ecolab
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Micron and Ecolab is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and Micron Technology 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 Micron Technology 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 Micron Technology i.e., Micron Technology and Ecolab go up and down completely randomly.
Pair Corralation between Micron Technology and Ecolab
Allowing for the 90-day total investment horizon Micron Technology is expected to generate 3.08 times more return on investment than Ecolab. However, Micron Technology is 3.08 times more volatile than Ecolab Inc. It trades about 0.33 of its potential returns per unit of risk. Ecolab Inc is currently generating about 0.43 per unit of risk. If you would invest 10,912 in Micron Technology on February 22, 2024 and sell it today you would earn a total of 1,716 from holding Micron Technology or generate 15.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Micron Technology vs. Ecolab Inc
Performance |
Timeline |
Micron Technology |
Ecolab Inc |
Micron Technology and Ecolab Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Micron Technology and Ecolab
The main advantage of trading using opposite Micron Technology and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology 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.Micron Technology vs. Spring Valley Acquisition | Micron Technology vs. Coca Cola Consolidated | Micron Technology vs. SEI Investments | Micron Technology vs. Coca Cola Femsa SAB |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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