Correlation Between Euro Tech and Purecycle Technologies

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

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

Diversification Opportunities for Euro Tech and Purecycle Technologies

0.45

Correlation Coefficient

Euro Tech  Purecycle Technologies

Very weak diversification

The 3 months correlation between Euro and Purecycle is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Euro Tech Holdings and Purecycle Technologies Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purecycle Technologies and Euro Tech 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 Euro Tech Holdings 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 Euro Tech i.e., Euro Tech and Purecycle Technologies go up and down completely randomly.

Pair Corralation between Euro Tech and Purecycle Technologies

Given the investment horizon of 90 days Euro Tech Holdings is expected to generate 5.24 times more return on investment than Purecycle Technologies. However, Euro Tech is 5.24 times more volatile than Purecycle Technologies Holdings. It trades about 0.1 of its potential returns per unit of risk. Purecycle Technologies Holdings is currently generating about 0.21 per unit of risk. If you would invest  156.00  in Euro Tech Holdings on February 2, 2024 and sell it today you would earn a total of  6.00  from holding Euro Tech Holdings or generate 3.85% return on investment over 90 days.

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

Euro Tech Holdings  vs.  Purecycle Technologies Holding

Euro Tech Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Euro Tech Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Euro Tech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Purecycle Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Purecycle Technologies Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Purecycle Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Euro Tech and Purecycle Technologies

The main advantage of trading using opposite Euro Tech and Purecycle Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Euro Tech 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 Euro Tech Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.