Correlation Between SJW Group and Pure Cycle

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

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

Diversification Opportunities for SJW Group and Pure Cycle

-0.59

Correlation Coefficient

SJW Group  Pure Cycle

Excellent diversification

The 3 months correlation between SJW and Pure is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding SJW Group Common and Pure Cycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Cycle and SJW Group 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 SJW Group Common are associated (or correlated) with Pure Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Cycle has no effect on the direction of SJW Group i.e., SJW Group and Pure Cycle go up and down completely randomly.

Pair Corralation between SJW Group and Pure Cycle

Considering the 90-day investment horizon SJW Group Common is expected to under-perform the Pure Cycle. But the stock apears to be less risky and, when comparing its historical volatility, SJW Group Common is 1.68 times less risky than Pure Cycle. The stock trades about -0.05 of its potential returns per unit of risk. The Pure Cycle is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,025  in Pure Cycle on September 2, 2024 and sell it today you would earn a total of  429.00  from holding Pure Cycle or generate 41.85% return on investment over 90 days.

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

SJW Group Common  vs.  Pure Cycle

SJW Group Common

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SJW Group Common has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward-looking indicators, SJW Group is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with SJW Group and Pure Cycle

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

The idea behind SJW Group Common and Pure Cycle 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.