Correlation Between PURA and Radworks

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

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

Diversification Opportunities for PURA and Radworks

-0.72

Correlation Coefficient

PURA  Radworks

Pay attention - limited upside

The 3 months correlation between PURA and Radworks is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding PURA and Radworks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radworks and PURA 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 PURA are associated (or correlated) with Radworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radworks has no effect on the direction of PURA i.e., PURA and Radworks go up and down completely randomly.

Pair Corralation between PURA and Radworks

Assuming the 90 days trading horizon PURA is expected to generate 1.08 times less return on investment than Radworks. But when comparing it to its historical volatility, PURA is 1.79 times less risky than Radworks. It trades about 0.02 of its potential returns per unit of risk. Radworks is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  429.00  in Radworks on January 17, 2024 and sell it today you would lose (258.00) from holding Radworks or give up 60.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	72.12%
Values	Daily Returns

PURA  vs.  Radworks

PURA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PURA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PURA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Radworks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Radworks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Radworks is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PURA and Radworks

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

The idea behind PURA and Radworks 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.