Correlation Between AOYAMA TRADING and PURETECH HEALTH

Can any of the company-specific risk be diversified away by investing in both AOYAMA TRADING and PURETECH 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 AOYAMA TRADING and PURETECH HEALTH into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AOYAMA TRADING and PURETECH HEALTH PLC, you can compare the effects of market volatilities on AOYAMA TRADING and PURETECH 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 AOYAMA TRADING with a short position of PURETECH HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of AOYAMA TRADING and PURETECH HEALTH.

Diversification Opportunities for AOYAMA TRADING and PURETECH HEALTH

0.6

Correlation Coefficient

AOYAMA TRADING  PURETECH HEALTH

Poor diversification

The 3 months correlation between AOYAMA and PURETECH is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding AOYAMA TRADING and PURETECH HEALTH PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PURETECH HEALTH PLC and AOYAMA TRADING 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 AOYAMA TRADING are associated (or correlated) with PURETECH HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PURETECH HEALTH PLC has no effect on the direction of AOYAMA TRADING i.e., AOYAMA TRADING and PURETECH HEALTH go up and down completely randomly.

Pair Corralation between AOYAMA TRADING and PURETECH HEALTH

Assuming the 90 days horizon AOYAMA TRADING is expected to generate 0.45 times more return on investment than PURETECH HEALTH. However, AOYAMA TRADING is 2.21 times less risky than PURETECH HEALTH. It trades about -0.15 of its potential returns per unit of risk. PURETECH HEALTH PLC is currently generating about -0.26 per unit of risk. If you would invest  1,390  in AOYAMA TRADING on October 11, 2024 and sell it today you would lose (50.00) from holding AOYAMA TRADING or give up 3.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

AOYAMA TRADING  vs.  PURETECH HEALTH PLC

AOYAMA TRADING

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AOYAMA TRADING are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AOYAMA TRADING reported solid returns over the last few months and may actually be approaching a breakup point.

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AOYAMA TRADING and PURETECH HEALTH

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

The idea behind AOYAMA TRADING and PURETECH HEALTH PLC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.