Correlation Between PureCycle Technologies and Focus Graphite

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

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

Diversification Opportunities for PureCycle Technologies and Focus Graphite

-0.79

Correlation Coefficient

PureCycle Technologies  Focus Graphite

Pay attention - limited upside

The 3 months correlation between PureCycle and Focus is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding PureCycle Technologies and Focus Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Graphite and PureCycle Technologies 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 PureCycle Technologies are associated (or correlated) with Focus Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Graphite has no effect on the direction of PureCycle Technologies i.e., PureCycle Technologies and Focus Graphite go up and down completely randomly.

Pair Corralation between PureCycle Technologies and Focus Graphite

Assuming the 90 days horizon PureCycle Technologies is expected to generate 1.25 times more return on investment than Focus Graphite. However, PureCycle Technologies is 1.25 times more volatile than Focus Graphite. It trades about 0.23 of its potential returns per unit of risk. Focus Graphite is currently generating about -0.04 per unit of risk. If you would invest  141.00  in PureCycle Technologies on September 3, 2024 and sell it today you would earn a total of  349.00  from holding PureCycle Technologies or generate 247.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

PureCycle Technologies  vs.  Focus Graphite

PureCycle Technologies

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PureCycle Technologies are ranked lower than 17 (%) 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.

Focus Graphite

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Graphite has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PureCycle Technologies and Focus Graphite

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

The idea behind PureCycle Technologies and Focus Graphite 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.