Correlation Between PureCycle Technologies and Grid Metals

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

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

Diversification Opportunities for PureCycle Technologies and Grid Metals

0.2

Correlation Coefficient

PureCycle Technologies  Grid Metals

Modest diversification

The 3 months correlation between PureCycle and Grid is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding PureCycle Technologies and Grid Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grid Metals Corp and PureCycle Technologies 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 PureCycle Technologies are associated (or correlated) with Grid Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grid Metals Corp has no effect on the direction of PureCycle Technologies i.e., PureCycle Technologies and Grid Metals go up and down completely randomly.

Pair Corralation between PureCycle Technologies and Grid Metals

Assuming the 90 days horizon PureCycle Technologies is expected to generate 1.42 times more return on investment than Grid Metals. However, PureCycle Technologies is 1.42 times more volatile than Grid Metals Corp. It trades about 0.23 of its potential returns per unit of risk. Grid Metals Corp is currently generating about 0.01 per unit of risk. If you would invest  120.00  in PureCycle Technologies on September 7, 2024 and sell it today you would earn a total of  320.00  from holding PureCycle Technologies or generate 266.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

PureCycle Technologies  vs.  Grid Metals Corp

PureCycle Technologies

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PureCycle Technologies are ranked lower than 18 (%) 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.

Grid Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grid Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Grid Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PureCycle Technologies and Grid Metals

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

The idea behind PureCycle Technologies and Grid Metals Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.