Correlation Between Ecovyst and Select Energy

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

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

Diversification Opportunities for Ecovyst and Select Energy

0.48

Correlation Coefficient

Ecovyst  Select Energy

Very weak diversification

The 3 months correlation between Ecovyst and Select is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ecovyst and Select Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Energy Services 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 Select Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Energy Services has no effect on the direction of Ecovyst i.e., Ecovyst and Select Energy go up and down completely randomly.

Pair Corralation between Ecovyst and Select Energy

Given the investment horizon of 90 days Ecovyst is expected to under-perform the Select Energy. In addition to that, Ecovyst is 1.41 times more volatile than Select Energy Services. It trades about -0.06 of its total potential returns per unit of risk. Select Energy Services is currently generating about 0.31 per unit of volatility. If you would invest  893.00  in Select Energy Services on February 16, 2024 and sell it today you would earn a total of  92.00  from holding Select Energy Services or generate 10.3% return on investment over 90 days.

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

Ecovyst  vs.  Select Energy Services

Ecovyst

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Ecovyst is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Select Energy Services

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Select Energy Services are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Select Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ecovyst and Select Energy

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

The idea behind Ecovyst and Select Energy Services 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.