Correlation Between PURETECH HEALTH and Air Transport

Can any of the company-specific risk be diversified away by investing in both PURETECH HEALTH and Air Transport 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 Air Transport 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 Air Transport Services, you can compare the effects of market volatilities on PURETECH HEALTH and Air Transport 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 Air Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of PURETECH HEALTH and Air Transport.

Diversification Opportunities for PURETECH HEALTH and Air Transport

0.7

Correlation Coefficient

PURETECH HEALTH  Air Transport

Poor diversification

The 3 months correlation between PURETECH and Air is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding PURETECH HEALTH PLC and Air Transport Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Transport Services 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 Air Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Transport Services has no effect on the direction of PURETECH HEALTH i.e., PURETECH HEALTH and Air Transport go up and down completely randomly.

Pair Corralation between PURETECH HEALTH and Air Transport

Assuming the 90 days horizon PURETECH HEALTH is expected to generate 12.05 times less return on investment than Air Transport. But when comparing it to its historical volatility, PURETECH HEALTH PLC is 1.1 times less risky than Air Transport. It trades about 0.02 of its potential returns per unit of risk. Air Transport Services is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,360  in Air Transport Services on October 10, 2024 and sell it today you would earn a total of  760.00  from holding Air Transport Services or generate 55.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

PURETECH HEALTH PLC  vs.  Air Transport Services

PURETECH HEALTH PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PURETECH HEALTH PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PURETECH HEALTH is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Air Transport Services

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PURETECH HEALTH and Air Transport

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

The idea behind PURETECH HEALTH PLC and Air Transport Services 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.