Correlation Between PURETECH HEALTH and Webster Financial

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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

PURETECHWebsterDiversified AwayPURETECHWebsterDiversified Away100%
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 Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

PURETECH HEALTH PLC  vs.  Webster Financial

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -20-15-10-505
JavaScript chart by amCharts 3.21.150VQ WED
       Timeline  
PURETECH HEALTH PLC 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days PURETECH HEALTH PLC 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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1.61.71.81.922.1
Webster Financial 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Webster Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Webster Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb5253545556575859

PURETECH HEALTH and Webster Financial Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.3-3.97-2.64-1.310.0211.262.523.785.04 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.150VQ WED
       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.
The idea behind PURETECH HEALTH PLC and Webster Financial 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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