Correlation Between York Water and Pure Cycle

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

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

Diversification Opportunities for York Water and Pure Cycle

0.82

Correlation Coefficient

York Water  Pure Cycle

Very poor diversification

The 3 months correlation between York and Pure is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding The York Water and Pure Cycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Cycle and York Water 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 The York Water 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 York Water i.e., York Water and Pure Cycle go up and down completely randomly.

Pair Corralation between York Water and Pure Cycle

Given the investment horizon of 90 days The York Water is expected to generate 0.75 times more return on investment than Pure Cycle. However, The York Water is 1.33 times less risky than Pure Cycle. It trades about -0.02 of its potential returns per unit of risk. Pure Cycle is currently generating about -0.13 per unit of risk. If you would invest  3,433  in The York Water on December 5, 2024 and sell it today you would lose (77.00) from holding The York Water or give up 2.24% of portfolio value over 90 days.

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

The York Water  vs.  Pure Cycle

York Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days The York Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, York Water is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with York Water and Pure Cycle

The main advantage of trading using opposite York Water and Pure Cycle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if York Water 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 The York Water 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.