Correlation Between Franklin Templeton and Purecycle Technologies

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

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

Diversification Opportunities for Franklin Templeton and Purecycle Technologies

0.65

Correlation Coefficient

Franklin Templeton  Purecycle Technologies

Poor diversification

The 3 months correlation between Franklin and Purecycle is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Templeton ETF and Purecycle Technologies Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purecycle Technologies and Franklin Templeton 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 Franklin Templeton ETF 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 Franklin Templeton i.e., Franklin Templeton and Purecycle Technologies go up and down completely randomly.

Pair Corralation between Franklin Templeton and Purecycle Technologies

Considering the 90-day investment horizon Franklin Templeton ETF is expected to under-perform the Purecycle Technologies. In addition to that, Franklin Templeton is 3.83 times more volatile than Purecycle Technologies Holdings. It trades about -0.22 of its total potential returns per unit of risk. Purecycle Technologies Holdings is currently generating about 0.22 per unit of volatility. If you would invest  735.00  in Purecycle Technologies Holdings on January 26, 2024 and sell it today you would earn a total of  12.00  from holding Purecycle Technologies Holdings or generate 1.63% return on investment over 90 days.

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

Franklin Templeton ETF  vs.  Purecycle Technologies Holding

Franklin Templeton ETF

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Templeton ETF are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Franklin Templeton is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Purecycle Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Purecycle Technologies Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Purecycle Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franklin Templeton and Purecycle Technologies

The main advantage of trading using opposite Franklin Templeton and Purecycle Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Templeton 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 Franklin Templeton ETF 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.