Correlation Between PureTech Health and VeriSign

Can any of the company-specific risk be diversified away by investing in both PureTech Health and VeriSign 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 VeriSign 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 VeriSign, you can compare the effects of market volatilities on PureTech Health and VeriSign 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 VeriSign. Check out your portfolio center. Please also check ongoing floating volatility patterns of PureTech Health and VeriSign.

Diversification Opportunities for PureTech Health and VeriSign

-0.35

Correlation Coefficient

PureTech Health  VeriSign

Very good diversification

The 3 months correlation between PureTech and VeriSign is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding PureTech Health plc and VeriSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeriSign 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 VeriSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeriSign has no effect on the direction of PureTech Health i.e., PureTech Health and VeriSign go up and down completely randomly.

Pair Corralation between PureTech Health and VeriSign

Assuming the 90 days trading horizon PureTech Health is expected to generate 9.18 times less return on investment than VeriSign. In addition to that, PureTech Health is 1.64 times more volatile than VeriSign. It trades about 0.01 of its total potential returns per unit of risk. VeriSign is currently generating about 0.16 per unit of volatility. If you would invest  18,546  in VeriSign on October 9, 2024 and sell it today you would earn a total of  2,550  from holding VeriSign or generate 13.75% return on investment over 90 days.

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

PureTech Health plc  vs.  VeriSign

PureTech Health plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PureTech Health plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PureTech Health is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

VeriSign

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VeriSign are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, VeriSign unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PureTech Health and VeriSign

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

The idea behind PureTech Health plc and VeriSign 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.