Correlation Between PURA and MTL

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

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

Diversification Opportunities for PURA and MTL

0.16

Correlation Coefficient

PURA  MTL

Average diversification

The 3 months correlation between PURA and MTL is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding PURA and MTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTL and PURA 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 PURA are associated (or correlated) with MTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTL has no effect on the direction of PURA i.e., PURA and MTL go up and down completely randomly.

Pair Corralation between PURA and MTL

If you would invest  88.00  in MTL on August 30, 2024 and sell it today you would earn a total of  57.00  from holding MTL or generate 64.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

PURA  vs.  MTL

PURA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PURA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, PURA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

MTL

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MTL are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, MTL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PURA and MTL

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

The idea behind PURA and MTL 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.