Correlation Between SJW and Pure Cycle

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

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

Diversification Opportunities for SJW and Pure Cycle

0.69

Correlation Coefficient

SJW  Pure Cycle

Poor diversification

The 3 months correlation between SJW and Pure is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SJW Corp. and Pure Cycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Cycle and SJW 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 SJW Corporation are associated (or correlated) with Pure Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Cycle has no effect on the direction of SJW i.e., SJW and Pure Cycle go up and down completely randomly.

Pair Corralation between SJW and Pure Cycle

Considering the 90-day investment horizon SJW Corporation is expected to under-perform the Pure Cycle. But the stock apears to be less risky and, when comparing its historical volatility, SJW Corporation is 1.32 times less risky than Pure Cycle. The stock trades about 0.0 of its potential returns per unit of risk. The Pure Cycle is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  981.00  in Pure Cycle on January 31, 2024 and sell it today you would lose (32.00) from holding Pure Cycle or give up 3.26% of portfolio value over 90 days.

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

SJW Corp.  vs.  Pure Cycle

SJW Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SJW Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward-looking indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pure Cycle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pure Cycle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Pure Cycle is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SJW and Pure Cycle

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

The idea behind SJW Corporation and Pure Cycle 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.