Correlation Between Federal Signal and PureCycle Technologies
Can any of the company-specific risk be diversified away by investing in both Federal Signal 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 Federal Signal and PureCycle Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Signal and PureCycle Technologies, you can compare the effects of market volatilities on Federal Signal 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 Federal Signal with a short position of PureCycle Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Signal and PureCycle Technologies.
Diversification Opportunities for Federal Signal and PureCycle Technologies
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Federal and PureCycle is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Federal Signal and PureCycle Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PureCycle Technologies and Federal Signal 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 Federal Signal 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 Federal Signal i.e., Federal Signal and PureCycle Technologies go up and down completely randomly.
Pair Corralation between Federal Signal and PureCycle Technologies
Considering the 90-day investment horizon Federal Signal is expected to generate 31.31 times less return on investment than PureCycle Technologies. But when comparing it to its historical volatility, Federal Signal is 35.98 times less risky than PureCycle Technologies. It trades about 0.08 of its potential returns per unit of risk. PureCycle Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 155.00 in PureCycle Technologies on August 27, 2024 and sell it today you would earn a total of 255.00 from holding PureCycle Technologies or generate 164.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.58% |
| Values | Daily Returns |
Federal Signal vs. PureCycle Technologies
Performance |
| Timeline |
| Federal Signal |
| PureCycle Technologies |
Federal Signal and PureCycle Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Signal and PureCycle Technologies
The main advantage of trading using opposite Federal Signal and PureCycle Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Signal 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.| Federal Signal vs. Energy Recovery | Federal Signal vs. CECO Environmental Corp | Federal Signal vs. 374Water Common Stock | Federal Signal vs. CO2 Solutions |
| PureCycle Technologies vs. Origin Materials Warrant | PureCycle Technologies vs. Purecycle Technologies Holdings | PureCycle Technologies vs. Blade Air Mobility |
Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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