Correlation Between SPDR SP and Purecycle Technologies

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

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

Diversification Opportunities for SPDR SP and Purecycle Technologies

0.22

Correlation Coefficient

SPDR SP  Purecycle Technologies

Modest diversification

The 3 months correlation between SPDR and Purecycle is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Semiconductor and Purecycle Technologies Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purecycle Technologies and SPDR SP 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 SPDR SP Semiconductor 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 SPDR SP i.e., SPDR SP and Purecycle Technologies go up and down completely randomly.

Pair Corralation between SPDR SP and Purecycle Technologies

Considering the 90-day investment horizon SPDR SP Semiconductor is expected to under-perform the Purecycle Technologies. In addition to that, SPDR SP is 5.78 times more volatile than Purecycle Technologies Holdings. It trades about -0.09 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	Very Weak
Accuracy	95.45%
Values	Daily Returns

SPDR SP Semiconductor  vs.  Purecycle Technologies Holding

SPDR SP Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Purecycle Technologies

Risk-Adjusted Performance

10 of 100

Good

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 SPDR SP and Purecycle Technologies

The main advantage of trading using opposite SPDR SP and Purecycle Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SPDR SP Semiconductor 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.