Correlation Between Ecovyst and Element Solutions

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

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

Diversification Opportunities for Ecovyst and Element Solutions

0.72

Correlation Coefficient

Ecovyst  Element Solutions

Poor diversification

The 3 months correlation between Ecovyst and Element is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ecovyst and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions and Ecovyst 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 Ecovyst are associated (or correlated) with Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of Ecovyst i.e., Ecovyst and Element Solutions go up and down completely randomly.

Pair Corralation between Ecovyst and Element Solutions

Given the investment horizon of 90 days Ecovyst is expected to under-perform the Element Solutions. In addition to that, Ecovyst is 2.18 times more volatile than Element Solutions. It trades about -0.07 of its total potential returns per unit of risk. Element Solutions is currently generating about 0.14 per unit of volatility. If you would invest  2,332  in Element Solutions on March 2, 2024 and sell it today you would earn a total of  60.00  from holding Element Solutions or generate 2.57% return on investment over 90 days.

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

Ecovyst  vs.  Element Solutions

Ecovyst

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ecovyst are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ecovyst is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Element Solutions

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Element Solutions are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Element Solutions is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ecovyst and Element Solutions

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

The idea behind Ecovyst and Element Solutions 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.