Correlation Between Pure Storage, and Raytheon Technologies

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

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

Diversification Opportunities for Pure Storage, and Raytheon Technologies

0.42

Correlation Coefficient

Pure Storage,  Raytheon Technologies

Very weak diversification

The 3 months correlation between Pure and Raytheon is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Pure Storage, and Raytheon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Pure Storage, i.e., Pure Storage, and Raytheon Technologies go up and down completely randomly.

Pair Corralation between Pure Storage, and Raytheon Technologies

Assuming the 90 days trading horizon Pure Storage, is expected to generate 2.78 times more return on investment than Raytheon Technologies. However, Pure Storage, is 2.78 times more volatile than Raytheon Technologies. It trades about 0.15 of its potential returns per unit of risk. Raytheon Technologies is currently generating about 0.08 per unit of risk. If you would invest  7,539  in Pure Storage, on October 24, 2024 and sell it today you would earn a total of  3,001  from holding Pure Storage, or generate 39.81% return on investment over 90 days.

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

Pure Storage,  vs.  Raytheon Technologies

Pure Storage,

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Storage, are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pure Storage, sustained solid returns over the last few months and may actually be approaching a breakup point.

Raytheon Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Raytheon Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pure Storage, and Raytheon Technologies

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

The idea behind Pure Storage, and Raytheon 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.