Correlation Between WM Technology and PureCycle Technologies

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

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

Diversification Opportunities for WM Technology and PureCycle Technologies

-0.08

Correlation Coefficient

WM Technology  PureCycle Technologies

Good diversification

The 3 months correlation between MAPSW and PureCycle is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding WM Technology and PureCycle Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PureCycle Technologies and WM Technology 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 WM Technology 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 WM Technology i.e., WM Technology and PureCycle Technologies go up and down completely randomly.

Pair Corralation between WM Technology and PureCycle Technologies

Assuming the 90 days horizon WM Technology is expected to under-perform the PureCycle Technologies. In addition to that, WM Technology is 1.23 times more volatile than PureCycle Technologies. It trades about -0.07 of its total potential returns per unit of risk. PureCycle Technologies is currently generating about 0.11 per unit of volatility. If you would invest  130.00  in PureCycle Technologies on March 11, 2024 and sell it today you would earn a total of  15.00  from holding PureCycle Technologies or generate 11.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

WM Technology  vs.  PureCycle Technologies

WM Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WM Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, WM Technology showed solid returns over the last few months and may actually be approaching a breakup point.

PureCycle Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with WM Technology and PureCycle Technologies

The main advantage of trading using opposite WM Technology and PureCycle Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WM Technology 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 WM Technology and PureCycle Technologies 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.