Correlation Between Pro Dex and Pure Cycle

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

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

Diversification Opportunities for Pro Dex and Pure Cycle

0.9

Correlation Coefficient

Pro Dex  Pure Cycle

Almost no diversification

The 3 months correlation between Pro and Pure is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Pro Dex and Pure Cycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Cycle and Pro Dex 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 Pro Dex 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 Pro Dex i.e., Pro Dex and Pure Cycle go up and down completely randomly.

Pair Corralation between Pro Dex and Pure Cycle

Given the investment horizon of 90 days Pro Dex is expected to generate 2.19 times more return on investment than Pure Cycle. However, Pro Dex is 2.19 times more volatile than Pure Cycle. It trades about 0.18 of its potential returns per unit of risk. Pure Cycle is currently generating about 0.11 per unit of risk. If you would invest  2,233  in Pro Dex on October 3, 2024 and sell it today you would earn a total of  2,442  from holding Pro Dex or generate 109.36% return on investment over 90 days.

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

Pro Dex  vs.  Pure Cycle

Pro Dex

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Dex are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Pro Dex showed solid returns over the last few months and may actually be approaching a breakup point.

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 inconsistent basic indicators, Pure Cycle displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pro Dex and Pure Cycle

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

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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.