Correlation Between PURETECH HEALTH and LIFENET INSURANCE

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

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

Diversification Opportunities for PURETECH HEALTH and LIFENET INSURANCE

0.39

Correlation Coefficient

PURETECH HEALTH  LIFENET INSURANCE

Weak diversification

The 3 months correlation between PURETECH and LIFENET is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding PURETECH HEALTH PLC and LIFENET INSURANCE CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFENET INSURANCE and PURETECH HEALTH 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 PURETECH HEALTH PLC are associated (or correlated) with LIFENET INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFENET INSURANCE has no effect on the direction of PURETECH HEALTH i.e., PURETECH HEALTH and LIFENET INSURANCE go up and down completely randomly.

Pair Corralation between PURETECH HEALTH and LIFENET INSURANCE

Assuming the 90 days horizon PURETECH HEALTH PLC is expected to under-perform the LIFENET INSURANCE. In addition to that, PURETECH HEALTH is 1.71 times more volatile than LIFENET INSURANCE CO. It trades about -0.08 of its total potential returns per unit of risk. LIFENET INSURANCE CO is currently generating about -0.06 per unit of volatility. If you would invest  1,120  in LIFENET INSURANCE CO on December 22, 2024 and sell it today you would lose (80.00) from holding LIFENET INSURANCE CO or give up 7.14% of portfolio value over 90 days.

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

PURETECH HEALTH PLC  vs.  LIFENET INSURANCE CO

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.

LIFENET INSURANCE

Risk-Adjusted Performance

Very Weak

Over the last 90 days LIFENET INSURANCE CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PURETECH HEALTH and LIFENET INSURANCE

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

The idea behind PURETECH HEALTH PLC and LIFENET INSURANCE CO 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.