Correlation Between Pure Cycle and Enlight Renewable

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

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

Diversification Opportunities for Pure Cycle and Enlight Renewable

0.37

Correlation Coefficient

Pure Cycle  Enlight Renewable

Weak diversification

The 3 months correlation between Pure and Enlight is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Pure Cycle and Enlight Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enlight Renewable Energy and Pure Cycle 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 Pure Cycle are associated (or correlated) with Enlight Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enlight Renewable Energy has no effect on the direction of Pure Cycle i.e., Pure Cycle and Enlight Renewable go up and down completely randomly.

Pair Corralation between Pure Cycle and Enlight Renewable

Given the investment horizon of 90 days Pure Cycle is expected to generate 0.99 times more return on investment than Enlight Renewable. However, Pure Cycle is 1.01 times less risky than Enlight Renewable. It trades about 0.14 of its potential returns per unit of risk. Enlight Renewable Energy is currently generating about 0.05 per unit of risk. If you would invest  1,071  in Pure Cycle on September 17, 2024 and sell it today you would earn a total of  241.00  from holding Pure Cycle or generate 22.5% return on investment over 90 days.

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

Pure Cycle  vs.  Enlight Renewable Energy

Pure Cycle

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Cycle are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Pure Cycle displayed solid returns over the last few months and may actually be approaching a breakup point.

Enlight Renewable Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enlight Renewable Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Enlight Renewable may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pure Cycle and Enlight Renewable

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

The idea behind Pure Cycle and Enlight Renewable Energy 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.