Correlation Between Pure Cycle and GE Vernova

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

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

Diversification Opportunities for Pure Cycle and GE Vernova

-0.6

Correlation Coefficient

Pure Cycle  GE Vernova

Excellent diversification

The 3 months correlation between Pure and GEV is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Pure Cycle and GE Vernova LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Vernova LLC and Pure Cycle 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 Cycle are associated (or correlated) with GE Vernova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Vernova LLC has no effect on the direction of Pure Cycle i.e., Pure Cycle and GE Vernova go up and down completely randomly.

Pair Corralation between Pure Cycle and GE Vernova

Given the investment horizon of 90 days Pure Cycle is expected to under-perform the GE Vernova. But the stock apears to be less risky and, when comparing its historical volatility, Pure Cycle is 1.99 times less risky than GE Vernova. The stock trades about -0.16 of its potential returns per unit of risk. The GE Vernova LLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  33,387  in GE Vernova LLC on November 28, 2024 and sell it today you would earn a total of  517.00  from holding GE Vernova LLC or generate 1.55% return on investment over 90 days.

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

Pure Cycle  vs.  GE Vernova LLC

Pure Cycle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pure Cycle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

GE Vernova LLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GE Vernova LLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, GE Vernova may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Pure Cycle and GE Vernova

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

The idea behind Pure Cycle and GE Vernova LLC 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.