Correlation Between Pure Storage and Applied Opt

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

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

Diversification Opportunities for Pure Storage and Applied Opt

0.79

Correlation Coefficient

Pure Storage  Applied Opt

Poor diversification

The 3 months correlation between Pure and Applied is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Pure Storage and Applied Opt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Opt and Pure Storage 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 Storage are associated (or correlated) with Applied Opt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Opt has no effect on the direction of Pure Storage i.e., Pure Storage and Applied Opt go up and down completely randomly.

Pair Corralation between Pure Storage and Applied Opt

Given the investment horizon of 90 days Pure Storage is expected to generate 2.64 times less return on investment than Applied Opt. But when comparing it to its historical volatility, Pure Storage is 2.38 times less risky than Applied Opt. It trades about 0.12 of its potential returns per unit of risk. Applied Opt is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,596  in Applied Opt on April 2, 2025 and sell it today you would earn a total of  973.00  from holding Applied Opt or generate 60.96% return on investment over 90 days.

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

Pure Storage  vs.  Applied Opt

Pure Storage

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Storage are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Pure Storage reported solid returns over the last few months and may actually be approaching a breakup point.

Applied Opt

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Opt are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Applied Opt demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pure Storage and Applied Opt

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

The idea behind Pure Storage and Applied Opt 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.