Correlation Between Ecolab and Ecovyst

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

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

Diversification Opportunities for Ecolab and Ecovyst

-0.55

Correlation Coefficient

Ecolab  Ecovyst

Excellent diversification

The 3 months correlation between Ecolab and Ecovyst is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and Ecovyst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecovyst 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 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 Ecolab i.e., Ecolab and Ecovyst go up and down completely randomly.

Pair Corralation between Ecolab and Ecovyst

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.53 times more return on investment than Ecovyst. However, Ecolab Inc is 1.89 times less risky than Ecovyst. It trades about 0.08 of its potential returns per unit of risk. Ecovyst is currently generating about 0.0 per unit of risk. If you would invest  14,791  in Ecolab Inc on August 23, 2024 and sell it today you would earn a total of  9,386  from holding Ecolab Inc or generate 63.46% return on investment over 90 days.

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

Ecolab Inc  vs.  Ecovyst

Ecolab Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecolab Inc has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Ecovyst

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ecovyst are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Ecovyst unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecolab and Ecovyst

The main advantage of trading using opposite Ecolab and Ecovyst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab 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 Ecolab Inc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.