Correlation Between Small Cap and Ecovyst

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

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

Diversification Opportunities for Small Cap and Ecovyst

0.47

Correlation Coefficient

Small Cap  Ecovyst

Very weak diversification

The 3 months correlation between Small and Ecovyst is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium and Ecovyst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecovyst and Small Cap 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 Small Cap Premium 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 Small Cap i.e., Small Cap and Ecovyst go up and down completely randomly.

Pair Corralation between Small Cap and Ecovyst

Considering the 90-day investment horizon Small Cap Premium is expected to generate 0.21 times more return on investment than Ecovyst. However, Small Cap Premium is 4.86 times less risky than Ecovyst. It trades about 0.07 of its potential returns per unit of risk. Ecovyst is currently generating about -0.01 per unit of risk. If you would invest  2,048  in Small Cap Premium on October 4, 2024 and sell it today you would earn a total of  394.00  from holding Small Cap Premium or generate 19.24% return on investment over 90 days.

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

Small Cap Premium  vs.  Ecovyst

Small Cap Premium

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Premium are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Small Cap is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Small Cap and Ecovyst

The main advantage of trading using opposite Small Cap and Ecovyst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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 Small Cap Premium 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.

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 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.