Correlation Between Canoo Holdings and PureCycle Technologies

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

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

Diversification Opportunities for Canoo Holdings and PureCycle Technologies

-0.78

Correlation Coefficient

Canoo Holdings  PureCycle Technologies

Pay attention - limited upside

The 3 months correlation between Canoo and PureCycle is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Canoo Holdings and PureCycle Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PureCycle Technologies and Canoo Holdings 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 Canoo Holdings are associated (or correlated) with PureCycle Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PureCycle Technologies has no effect on the direction of Canoo Holdings i.e., Canoo Holdings and PureCycle Technologies go up and down completely randomly.

Pair Corralation between Canoo Holdings and PureCycle Technologies

Assuming the 90 days horizon Canoo Holdings is expected to under-perform the PureCycle Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Canoo Holdings is 1.17 times less risky than PureCycle Technologies. The stock trades about -0.1 of its potential returns per unit of risk. The PureCycle Technologies is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  141.00  in PureCycle Technologies on September 3, 2024 and sell it today you would earn a total of  349.00  from holding PureCycle Technologies or generate 247.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Canoo Holdings  vs.  PureCycle Technologies

Canoo Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canoo Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

PureCycle Technologies

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PureCycle Technologies are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PureCycle Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canoo Holdings and PureCycle Technologies

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

The idea behind Canoo Holdings and PureCycle Technologies 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .