Correlation Between PURETECH HEALTH and Webster Financial
Can any of the company-specific risk be diversified away by investing in both PURETECH HEALTH and Webster Financial 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 Webster Financial 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 Webster Financial, you can compare the effects of market volatilities on PURETECH HEALTH and Webster Financial 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 Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of PURETECH HEALTH and Webster Financial.
Diversification Opportunities for PURETECH HEALTH and Webster Financial
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between PURETECH and Webster is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding PURETECH HEALTH PLC and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial 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 Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of PURETECH HEALTH i.e., PURETECH HEALTH and Webster Financial go up and down completely randomly.
Pair Corralation between PURETECH HEALTH and Webster Financial
Assuming the 90 days horizon PURETECH HEALTH PLC is expected to under-perform the Webster Financial. In addition to that, PURETECH HEALTH is 1.99 times more volatile than Webster Financial. It trades about -0.04 of its total potential returns per unit of risk. Webster Financial is currently generating about 0.01 per unit of volatility. If you would invest 5,613 in Webster Financial on November 22, 2024 and sell it today you would lose (13.00) from holding Webster Financial or give up 0.23% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
PURETECH HEALTH PLC vs. Webster Financial
Performance |
Timeline |
PURETECH HEALTH PLC |
Webster Financial |
PURETECH HEALTH and Webster Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PURETECH HEALTH and Webster Financial
The main advantage of trading using opposite PURETECH HEALTH and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PURETECH HEALTH position performs unexpectedly, Webster Financial 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 Webster Financial will offset losses from the drop in Webster Financial's long position.PURETECH HEALTH vs. Jacquet Metal Service | ||
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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