Correlation Between NH Foods and Pure Cycle

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

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

Diversification Opportunities for NH Foods and Pure Cycle

0.0

Correlation Coefficient

NH Foods  Pure Cycle

Pay attention - limited upside

The 3 months correlation between NIPMY and Pure is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NH Foods Ltd and Pure Cycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Cycle and NH Foods 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 NH Foods Ltd 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 NH Foods i.e., NH Foods and Pure Cycle go up and down completely randomly.

Pair Corralation between NH Foods and Pure Cycle

Assuming the 90 days horizon NH Foods is expected to generate 8.67 times less return on investment than Pure Cycle. But when comparing it to its historical volatility, NH Foods Ltd is 5.93 times less risky than Pure Cycle. It trades about 0.09 of its potential returns per unit of risk. Pure Cycle is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  901.00  in Pure Cycle on September 23, 2024 and sell it today you would earn a total of  394.00  from holding Pure Cycle or generate 43.73% return on investment over 90 days.

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

NH Foods Ltd  vs.  Pure Cycle

NH Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NH Foods Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, NH Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pure Cycle

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Cycle are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Pure Cycle displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NH Foods and Pure Cycle

The main advantage of trading using opposite NH Foods and Pure Cycle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NH Foods 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 NH Foods Ltd 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.