Correlation Between PURETECH HEALTH and CVS Health

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

Diversification Opportunities for PURETECH HEALTH and CVS Health

0.15

Correlation Coefficient

PURETECH HEALTH  CVS Health

Average diversification

The 3 months correlation between PURETECH and CVS is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding PURETECH HEALTH PLC and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health has no effect on the direction of PURETECH HEALTH i.e., PURETECH HEALTH and CVS Health go up and down completely randomly.

Pair Corralation between PURETECH HEALTH and CVS Health

Assuming the 90 days horizon PURETECH HEALTH PLC is expected to under-perform the CVS Health. In addition to that, PURETECH HEALTH is 1.06 times more volatile than CVS Health. It trades about -0.07 of its total potential returns per unit of risk. CVS Health is currently generating about 0.01 per unit of volatility. If you would invest  5,190  in CVS Health on October 24, 2024 and sell it today you would lose (65.00) from holding CVS Health or give up 1.25% of portfolio value over 90 days.

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

PURETECH HEALTH PLC  vs.  CVS Health

PURETECH HEALTH PLC

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

CVS Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PURETECH HEALTH and CVS Health

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

The idea behind PURETECH HEALTH PLC and CVS Health 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..