Correlation Between Ecovyst and Renault SA

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

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

Diversification Opportunities for Ecovyst and Renault SA

-0.03

Correlation Coefficient

Ecovyst  Renault SA

Good diversification

The 3 months correlation between Ecovyst and Renault is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ecovyst and Renault SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renault SA 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 Renault SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renault SA has no effect on the direction of Ecovyst i.e., Ecovyst and Renault SA go up and down completely randomly.

Pair Corralation between Ecovyst and Renault SA

Given the investment horizon of 90 days Ecovyst is expected to generate 1.2 times less return on investment than Renault SA. In addition to that, Ecovyst is 1.31 times more volatile than Renault SA. It trades about 0.1 of its total potential returns per unit of risk. Renault SA is currently generating about 0.15 per unit of volatility. If you would invest  4,000  in Renault SA on October 8, 2024 and sell it today you would earn a total of  840.00  from holding Renault SA or generate 21.0% return on investment over 90 days.

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

Ecovyst  vs.  Renault SA

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 unsteady basic indicators, Ecovyst unveiled solid returns over the last few months and may actually be approaching a breakup point.

Renault SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Renault SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Renault SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecovyst and Renault SA

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

The idea behind Ecovyst and Renault SA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.