Correlation Between Focus Home and PURETECH HEALTH

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

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

Diversification Opportunities for Focus Home and PURETECH HEALTH

0.36

Correlation Coefficient

Focus Home  PURETECH HEALTH

Weak diversification

The 3 months correlation between Focus and PURETECH is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Focus Home Interactive and PURETECH HEALTH PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PURETECH HEALTH PLC and Focus Home 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 Focus Home Interactive are associated (or correlated) with PURETECH HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PURETECH HEALTH PLC has no effect on the direction of Focus Home i.e., Focus Home and PURETECH HEALTH go up and down completely randomly.

Pair Corralation between Focus Home and PURETECH HEALTH

Assuming the 90 days horizon Focus Home Interactive is expected to generate 0.96 times more return on investment than PURETECH HEALTH. However, Focus Home Interactive is 1.04 times less risky than PURETECH HEALTH. It trades about -0.03 of its potential returns per unit of risk. PURETECH HEALTH PLC is currently generating about -0.08 per unit of risk. If you would invest  1,880  in Focus Home Interactive on December 22, 2024 and sell it today you would lose (134.00) from holding Focus Home Interactive or give up 7.13% of portfolio value over 90 days.

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

Focus Home Interactive  vs.  PURETECH HEALTH PLC

Focus Home Interactive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Focus Home Interactive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Focus Home is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

PURETECH HEALTH PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days PURETECH HEALTH PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Focus Home and PURETECH HEALTH

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

The idea behind Focus Home Interactive and PURETECH HEALTH PLC 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.