Correlation Between Bank of America and Ecovyst

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

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

Diversification Opportunities for Bank of America and Ecovyst

-0.66

Correlation Coefficient

Bank of America  Ecovyst

Excellent diversification

The 3 months correlation between Bank and Ecovyst is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Ecovyst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecovyst and Bank of America 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 Bank of America are associated (or correlated) with Ecovyst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecovyst has no effect on the direction of Bank of America i.e., Bank of America and Ecovyst go up and down completely randomly.

Pair Corralation between Bank of America and Ecovyst

Assuming the 90 days trading horizon Bank of America is expected to generate 0.26 times more return on investment than Ecovyst. However, Bank of America is 3.85 times less risky than Ecovyst. It trades about 0.48 of its potential returns per unit of risk. Ecovyst is currently generating about 0.04 per unit of risk. If you would invest  2,259  in Bank of America on July 2, 2024 and sell it today you would earn a total of  123.00  from holding Bank of America or generate 5.44% return on investment over 90 days.

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

Bank of America  vs.  Ecovyst

Bank of America

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Ecovyst

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecovyst has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in October 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bank of America and Ecovyst

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

The idea behind Bank of America and Ecovyst 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.