Correlation Between Purepoint Uranium and Centrus Energy

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

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

Diversification Opportunities for Purepoint Uranium and Centrus Energy

0.63

Correlation Coefficient

Purepoint Uranium  Centrus Energy

Poor diversification

The 3 months correlation between Purepoint and Centrus is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Purepoint Uranium Group and Centrus Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrus Energy and Purepoint Uranium 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 Purepoint Uranium Group are associated (or correlated) with Centrus Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrus Energy has no effect on the direction of Purepoint Uranium i.e., Purepoint Uranium and Centrus Energy go up and down completely randomly.

Pair Corralation between Purepoint Uranium and Centrus Energy

Assuming the 90 days horizon Purepoint Uranium Group is expected to generate 1.12 times more return on investment than Centrus Energy. However, Purepoint Uranium is 1.12 times more volatile than Centrus Energy. It trades about -0.17 of its potential returns per unit of risk. Centrus Energy is currently generating about -0.25 per unit of risk. If you would invest  21.00  in Purepoint Uranium Group on September 23, 2024 and sell it today you would lose (4.00) from holding Purepoint Uranium Group or give up 19.05% of portfolio value over 90 days.

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

Purepoint Uranium Group  vs.  Centrus Energy

Purepoint Uranium

Risk-Adjusted Performance

0 of 100

Very Weak

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

Centrus Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centrus Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Centrus Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Purepoint Uranium and Centrus Energy

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

The idea behind Purepoint Uranium Group and Centrus 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.