Correlation Between Pure Cycle and Magna International
Can any of the company-specific risk be diversified away by investing in both Pure Cycle and Magna International 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 Pure Cycle and Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pure Cycle and Magna International, you can compare the effects of market volatilities on Pure Cycle and Magna International 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 Pure Cycle with a short position of Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pure Cycle and Magna International.
Diversification Opportunities for Pure Cycle and Magna International
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pure and Magna is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pure Cycle and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International and Pure Cycle 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 Pure Cycle are associated (or correlated) with Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of Pure Cycle i.e., Pure Cycle and Magna International go up and down completely randomly.
Pair Corralation between Pure Cycle and Magna International
Given the investment horizon of 90 days Pure Cycle is expected to generate 1.05 times more return on investment than Magna International. However, Pure Cycle is 1.05 times more volatile than Magna International. It trades about 0.08 of its potential returns per unit of risk. Magna International is currently generating about -0.02 per unit of risk. If you would invest 1,015 in Pure Cycle on September 2, 2024 and sell it today you would earn a total of 439.00 from holding Pure Cycle or generate 43.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pure Cycle vs. Magna International
Performance |
| Timeline |
| Pure Cycle |
| Magna International |
Pure Cycle and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pure Cycle and Magna International
The main advantage of trading using opposite Pure Cycle and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pure Cycle position performs unexpectedly, Magna International 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 Magna International will offset losses from the drop in Magna International's long position.| Pure Cycle vs. Cadiz Inc | Pure Cycle vs. Artesian Resources | Pure Cycle vs. Global Water Resources | Pure Cycle vs. Parke Bancorp |
| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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