Correlation Between Pure Storage and Science Applications

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

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

Diversification Opportunities for Pure Storage and Science Applications

-0.39

Correlation Coefficient

Pure Storage  Science Applications

Very good diversification

The 3 months correlation between Pure and Science is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Pure Storage and Science Applications Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Applications and Pure Storage 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 Storage are associated (or correlated) with Science Applications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Applications has no effect on the direction of Pure Storage i.e., Pure Storage and Science Applications go up and down completely randomly.

Pair Corralation between Pure Storage and Science Applications

Assuming the 90 days horizon Pure Storage is expected to generate 1.82 times more return on investment than Science Applications. However, Pure Storage is 1.82 times more volatile than Science Applications International. It trades about 0.07 of its potential returns per unit of risk. Science Applications International is currently generating about 0.02 per unit of risk. If you would invest  2,474  in Pure Storage on September 17, 2024 and sell it today you would earn a total of  3,583  from holding Pure Storage or generate 144.83% return on investment over 90 days.

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

Pure Storage  vs.  Science Applications Internati

Pure Storage

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Storage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pure Storage reported solid returns over the last few months and may actually be approaching a breakup point.

Science Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Pure Storage and Science Applications

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

The idea behind Pure Storage and Science Applications International 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.