Correlation Between Pure Cycle and United Guardian

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

By analyzing existing cross correlation between Pure Cycle and United Guardian, you can compare the effects of market volatilities on Pure Cycle and United Guardian 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 United Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pure Cycle and United Guardian.

Diversification Opportunities for Pure Cycle and United Guardian

-0.85

Correlation Coefficient

Pure Cycle  United Guardian

Pay attention - limited upside

The 3 months correlation between Pure and United is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Pure Cycle and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Pure Cycle i.e., Pure Cycle and United Guardian go up and down completely randomly.

Pair Corralation between Pure Cycle and United Guardian

Given the investment horizon of 90 days Pure Cycle is expected to generate 0.63 times more return on investment than United Guardian. However, Pure Cycle is 1.58 times less risky than United Guardian. It trades about 0.2 of its potential returns per unit of risk. United Guardian is currently generating about -0.03 per unit of risk. If you would invest  974.00  in Pure Cycle on September 5, 2024 and sell it today you would earn a total of  425.00  from holding Pure Cycle or generate 43.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.82%
Values	Daily Returns

Pure Cycle  vs.  United Guardian

Pure Cycle

Risk-Adjusted Performance

18 of 100

Solid

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

United Guardian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Guardian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Pure Cycle and United Guardian

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

The idea behind Pure Cycle and United Guardian 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.