Correlation Between Energy Recovery and PCT

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

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

Diversification Opportunities for Energy Recovery and PCT

0.21

Correlation Coefficient

Energy Recovery  PCT

Modest diversification

The 3 months correlation between Energy and PCT is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Energy Recovery and PCT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCT and Energy Recovery 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 Energy Recovery are associated (or correlated) with PCT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCT has no effect on the direction of Energy Recovery i.e., Energy Recovery and PCT go up and down completely randomly.

Pair Corralation between Energy Recovery and PCT

If you would invest  0.54  in PCT on September 13, 2024 and sell it today you would earn a total of  0.00  from holding PCT or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Energy Recovery  vs.  PCT

Energy Recovery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Recovery are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Energy Recovery may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PCT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PCT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, PCT is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Energy Recovery and PCT

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

The idea behind Energy Recovery and PCT 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.