Correlation Between PURETECH HEALTH and EMPEROR ENT

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

Diversification Opportunities for PURETECH HEALTH and EMPEROR ENT

0.35

Correlation Coefficient

PURETECH HEALTH  EMPEROR ENT

Weak diversification

The 3 months correlation between PURETECH and EMPEROR is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding PURETECH HEALTH PLC and EMPEROR ENT HOTEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMPEROR ENT HOTEL 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 EMPEROR ENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMPEROR ENT HOTEL has no effect on the direction of PURETECH HEALTH i.e., PURETECH HEALTH and EMPEROR ENT go up and down completely randomly.

Pair Corralation between PURETECH HEALTH and EMPEROR ENT

Assuming the 90 days horizon PURETECH HEALTH PLC is expected to under-perform the EMPEROR ENT. In addition to that, PURETECH HEALTH is 1.37 times more volatile than EMPEROR ENT HOTEL. It trades about -0.08 of its total potential returns per unit of risk. EMPEROR ENT HOTEL is currently generating about -0.04 per unit of volatility. If you would invest  3.40  in EMPEROR ENT HOTEL on December 22, 2024 and sell it today you would lose (0.20) from holding EMPEROR ENT HOTEL or give up 5.88% 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.  EMPEROR ENT HOTEL

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.

EMPEROR ENT HOTEL

Risk-Adjusted Performance

Very Weak

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

Pair Trading with PURETECH HEALTH and EMPEROR ENT

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

The idea behind PURETECH HEALTH PLC and EMPEROR ENT HOTEL 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..