Correlation Between TOMI Environmental and Purecycle Technologies

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

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

Diversification Opportunities for TOMI Environmental and Purecycle Technologies

0.22

Correlation Coefficient

TOMI Environmental  Purecycle Technologies

Modest diversification

The 3 months correlation between TOMI and Purecycle is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding TOMI Environmental Solutions and Purecycle Technologies Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purecycle Technologies and TOMI Environmental 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 TOMI Environmental Solutions are associated (or correlated) with Purecycle Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purecycle Technologies has no effect on the direction of TOMI Environmental i.e., TOMI Environmental and Purecycle Technologies go up and down completely randomly.

Pair Corralation between TOMI Environmental and Purecycle Technologies

Given the investment horizon of 90 days TOMI Environmental Solutions is expected to under-perform the Purecycle Technologies. But the stock apears to be less risky and, when comparing its historical volatility, TOMI Environmental Solutions is 1.98 times less risky than Purecycle Technologies. The stock trades about -0.02 of its potential returns per unit of risk. The Purecycle Technologies Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  579.00  in Purecycle Technologies Holdings on August 31, 2024 and sell it today you would earn a total of  741.00  from holding Purecycle Technologies Holdings or generate 127.98% return on investment over 90 days.

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

TOMI Environmental Solutions  vs.  Purecycle Technologies Holding

TOMI Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOMI Environmental Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, TOMI Environmental is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Purecycle Technologies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Purecycle Technologies Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Purecycle Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TOMI Environmental and Purecycle Technologies

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

The idea behind TOMI Environmental Solutions and Purecycle Technologies Holdings 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.