Correlation Between Destination and Ecovyst

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

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

Diversification Opportunities for Destination and Ecovyst

-0.15

Correlation Coefficient

Destination  Ecovyst

Good diversification

The 3 months correlation between Destination and Ecovyst is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Destination XL Group and Ecovyst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecovyst and Destination 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 Destination XL Group 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 Destination i.e., Destination and Ecovyst go up and down completely randomly.

Pair Corralation between Destination and Ecovyst

Given the investment horizon of 90 days Destination is expected to generate 3.3 times less return on investment than Ecovyst. In addition to that, Destination is 1.44 times more volatile than Ecovyst. It trades about 0.03 of its total potential returns per unit of risk. Ecovyst is currently generating about 0.14 per unit of volatility. If you would invest  634.00  in Ecovyst on October 23, 2024 and sell it today you would earn a total of  154.00  from holding Ecovyst or generate 24.29% return on investment over 90 days.

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

Destination XL Group  vs.  Ecovyst

Destination XL Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Destination XL Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Destination may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Ecovyst

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ecovyst are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Ecovyst unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Destination and Ecovyst

The main advantage of trading using opposite Destination and Ecovyst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Destination 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 Destination XL Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.