Correlation Between 374Water Common and PureCycle Technologies

Can any of the company-specific risk be diversified away by investing in both 374Water Common and PureCycle Technologies 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 374Water Common and PureCycle Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 374Water Common Stock and PureCycle Technologies, you can compare the effects of market volatilities on 374Water Common and PureCycle Technologies 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 374Water Common with a short position of PureCycle Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of 374Water Common and PureCycle Technologies.

Diversification Opportunities for 374Water Common and PureCycle Technologies

-0.2

Correlation Coefficient

374Water Common  PureCycle Technologies

Good diversification

The 3 months correlation between 374Water and PureCycle is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding 374Water Common Stock and PureCycle Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PureCycle Technologies and 374Water Common 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 374Water Common Stock are associated (or correlated) with PureCycle Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PureCycle Technologies has no effect on the direction of 374Water Common i.e., 374Water Common and PureCycle Technologies go up and down completely randomly.

Pair Corralation between 374Water Common and PureCycle Technologies

Given the investment horizon of 90 days 374Water Common Stock is expected to under-perform the PureCycle Technologies. But the stock apears to be less risky and, when comparing its historical volatility, 374Water Common Stock is 1.38 times less risky than PureCycle Technologies. The stock trades about -0.14 of its potential returns per unit of risk. The PureCycle Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  275.00  in PureCycle Technologies on September 21, 2024 and sell it today you would earn a total of  90.00  from holding PureCycle Technologies or generate 32.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

374Water Common Stock  vs.  PureCycle Technologies

374Water Common Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 374Water Common Stock has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

PureCycle Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PureCycle Technologies are ranked lower than 7 (%) 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.

Pair Trading with 374Water Common and PureCycle Technologies

The main advantage of trading using opposite 374Water Common and PureCycle Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 374Water Common position performs unexpectedly, PureCycle Technologies 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 PureCycle Technologies will offset losses from the drop in PureCycle Technologies' long position.

The idea behind 374Water Common Stock and PureCycle Technologies 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 Transaction History module to view history of all your transactions and understand their impact on performance.