Correlation Between PF Industries and Pure Cycle

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

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

Diversification Opportunities for PF Industries and Pure Cycle

0.71

Correlation Coefficient

PF Industries  Pure Cycle

Poor diversification

The 3 months correlation between PFIN and Pure is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding PF Industries and Pure Cycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Cycle and PF Industries 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 PF Industries 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 PF Industries i.e., PF Industries and Pure Cycle go up and down completely randomly.

Pair Corralation between PF Industries and Pure Cycle

If you would invest  1,025  in Pure Cycle on October 3, 2024 and sell it today you would earn a total of  243.00  from holding Pure Cycle or generate 23.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.19%
Values	Daily Returns

PF Industries  vs.  Pure Cycle

PF Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PF Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, PF Industries is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

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 PF Industries and Pure Cycle

The main advantage of trading using opposite PF Industries and Pure Cycle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PF Industries 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 PF Industries 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.