Correlation Between Pure Cycle and Global Engine

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

By analyzing existing cross correlation between Pure Cycle and Global Engine Group, you can compare the effects of market volatilities on Pure Cycle and Global Engine 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 Global Engine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pure Cycle and Global Engine.

Diversification Opportunities for Pure Cycle and Global Engine

-0.18

Correlation Coefficient

Pure Cycle  Global Engine

Good diversification

The 3 months correlation between Pure and Global is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Pure Cycle and Global Engine Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Engine Group 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 Global Engine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Engine Group has no effect on the direction of Pure Cycle i.e., Pure Cycle and Global Engine go up and down completely randomly.

Pair Corralation between Pure Cycle and Global Engine

Given the investment horizon of 90 days Pure Cycle is expected to under-perform the Global Engine. But the stock apears to be less risky and, when comparing its historical volatility, Pure Cycle is 4.69 times less risky than Global Engine. The stock trades about -0.3 of its potential returns per unit of risk. The Global Engine Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  154.00  in Global Engine Group on October 23, 2024 and sell it today you would earn a total of  27.50  from holding Global Engine Group or generate 17.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Pure Cycle  vs.  Global Engine Group

Pure Cycle

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Cycle are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Pure Cycle may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Global Engine Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Engine Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Pure Cycle and Global Engine

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

The idea behind Pure Cycle and Global Engine Group 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.