Correlation Between Ecovyst and American Vanguard

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

By analyzing existing cross correlation between Ecovyst and American Vanguard, you can compare the effects of market volatilities on Ecovyst and American Vanguard 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 American Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecovyst and American Vanguard.

Diversification Opportunities for Ecovyst and American Vanguard

0.53

Correlation Coefficient

Ecovyst  American Vanguard

Very weak diversification

The 3 months correlation between Ecovyst and American is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ecovyst and American Vanguard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Vanguard 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 American Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Vanguard has no effect on the direction of Ecovyst i.e., Ecovyst and American Vanguard go up and down completely randomly.

Pair Corralation between Ecovyst and American Vanguard

Given the investment horizon of 90 days Ecovyst is expected to under-perform the American Vanguard. But the stock apears to be less risky and, when comparing its historical volatility, Ecovyst is 1.34 times less risky than American Vanguard. The stock trades about -0.04 of its potential returns per unit of risk. The American Vanguard is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  444.00  in American Vanguard on December 20, 2024 and sell it today you would earn a total of  55.00  from holding American Vanguard or generate 12.39% return on investment over 90 days.

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

Ecovyst  vs.  American Vanguard

Ecovyst

Risk-Adjusted Performance

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 latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

American Vanguard

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Vanguard are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, American Vanguard exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecovyst and American Vanguard

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

The idea behind Ecovyst and American Vanguard 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.