Correlation Between COMPASS MINERALS and PURETECH HEALTH

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

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

Diversification Opportunities for COMPASS MINERALS and PURETECH HEALTH

0.48

Correlation Coefficient

COMPASS MINERALS  PURETECH HEALTH

Very weak diversification

The 3 months correlation between COMPASS and PURETECH is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding COMPASS MINERALS 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 COMPASS MINERALS 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 COMPASS MINERALS 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 COMPASS MINERALS i.e., COMPASS MINERALS and PURETECH HEALTH go up and down completely randomly.

Pair Corralation between COMPASS MINERALS and PURETECH HEALTH

Assuming the 90 days trading horizon COMPASS MINERALS is expected to under-perform the PURETECH HEALTH. In addition to that, COMPASS MINERALS is 1.51 times more volatile than PURETECH HEALTH PLC. It trades about -0.17 of its total potential returns per unit of risk. PURETECH HEALTH PLC is currently generating about -0.25 per unit of volatility. If you would invest  206.00  in PURETECH HEALTH PLC on October 11, 2024 and sell it today you would lose (27.00) from holding PURETECH HEALTH PLC or give up 13.11% of portfolio value over 90 days.

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

COMPASS MINERALS  vs.  PURETECH HEALTH PLC

COMPASS MINERALS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COMPASS MINERALS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, COMPASS MINERALS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

PURETECH HEALTH PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PURETECH HEALTH PLC are ranked lower than 2 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with COMPASS MINERALS and PURETECH HEALTH

The main advantage of trading using opposite COMPASS MINERALS and PURETECH HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMPASS MINERALS 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 COMPASS MINERALS 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.