Correlation Between RadNet and Ecovyst

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

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

Diversification Opportunities for RadNet and Ecovyst

0.85

Correlation Coefficient

RadNet  Ecovyst

Very poor diversification

The 3 months correlation between RadNet and Ecovyst is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding RadNet Inc and Ecovyst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecovyst and RadNet 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 RadNet Inc 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 RadNet i.e., RadNet and Ecovyst go up and down completely randomly.

Pair Corralation between RadNet and Ecovyst

Given the investment horizon of 90 days RadNet Inc is expected to generate 0.7 times more return on investment than Ecovyst. However, RadNet Inc is 1.42 times less risky than Ecovyst. It trades about -0.08 of its potential returns per unit of risk. Ecovyst is currently generating about -0.12 per unit of risk. If you would invest  7,909  in RadNet Inc on September 18, 2024 and sell it today you would lose (257.00) from holding RadNet Inc or give up 3.25% of portfolio value over 90 days.

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

RadNet Inc  vs.  Ecovyst

RadNet Inc

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RadNet Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, RadNet unveiled solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with RadNet and Ecovyst

The main advantage of trading using opposite RadNet and Ecovyst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RadNet 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 RadNet Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.