Correlation Between PureTech Health and Amazon

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

Diversification Opportunities for PureTech Health and Amazon

0.67

Correlation Coefficient

PureTech Health  Amazon

Poor diversification

The 3 months correlation between PureTech and Amazon is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding PureTech Health plc and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of PureTech Health i.e., PureTech Health and Amazon go up and down completely randomly.

Pair Corralation between PureTech Health and Amazon

Assuming the 90 days trading horizon PureTech Health plc is expected to under-perform the Amazon. In addition to that, PureTech Health is 1.71 times more volatile than Amazon Inc. It trades about -0.17 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.4 per unit of volatility. If you would invest  20,000  in Amazon Inc on September 24, 2024 and sell it today you would earn a total of  2,550  from holding Amazon Inc or generate 12.75% return on investment over 90 days.

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

PureTech Health plc  vs.  Amazon Inc

PureTech Health plc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PureTech Health plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, PureTech Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Amazon Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Amazon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PureTech Health and Amazon

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

The idea behind PureTech Health plc and Amazon Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.