Correlation Between INSURANCE AUST and PURETECH HEALTH

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

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

Diversification Opportunities for INSURANCE AUST and PURETECH HEALTH

0.65

Correlation Coefficient

INSURANCE AUST  PURETECH HEALTH

Poor diversification

The 3 months correlation between INSURANCE and PURETECH is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding INSURANCE AUST GRP 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 INSURANCE AUST 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 INSURANCE AUST GRP 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 INSURANCE AUST i.e., INSURANCE AUST and PURETECH HEALTH go up and down completely randomly.

Pair Corralation between INSURANCE AUST and PURETECH HEALTH

Assuming the 90 days trading horizon INSURANCE AUST GRP is expected to generate 0.53 times more return on investment than PURETECH HEALTH. However, INSURANCE AUST GRP is 1.88 times less risky than PURETECH HEALTH. It trades about 0.04 of its potential returns per unit of risk. PURETECH HEALTH PLC is currently generating about -0.25 per unit of risk. If you would invest  500.00  in INSURANCE AUST GRP on October 11, 2024 and sell it today you would earn a total of  5.00  from holding INSURANCE AUST GRP or generate 1.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

INSURANCE AUST GRP  vs.  PURETECH HEALTH PLC

INSURANCE AUST GRP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INSURANCE AUST GRP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, INSURANCE AUST may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 INSURANCE AUST and PURETECH HEALTH

The main advantage of trading using opposite INSURANCE AUST and PURETECH HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INSURANCE AUST 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 INSURANCE AUST GRP 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.