Correlation Between PureTech Health and Bytes Technology

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

Diversification Opportunities for PureTech Health and Bytes Technology

-0.63

Correlation Coefficient

PureTech Health  Bytes Technology

Excellent diversification

The 3 months correlation between PureTech and Bytes is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding PureTech Health plc and Bytes Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bytes Technology 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 Bytes Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bytes Technology has no effect on the direction of PureTech Health i.e., PureTech Health and Bytes Technology go up and down completely randomly.

Pair Corralation between PureTech Health and Bytes Technology

Assuming the 90 days trading horizon PureTech Health plc is expected to under-perform the Bytes Technology. In addition to that, PureTech Health is 1.33 times more volatile than Bytes Technology. It trades about -0.02 of its total potential returns per unit of risk. Bytes Technology is currently generating about 0.0 per unit of volatility. If you would invest  46,211  in Bytes Technology on September 28, 2024 and sell it today you would lose (3,971) from holding Bytes Technology or give up 8.59% of portfolio value over 90 days.

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

PureTech Health plc  vs.  Bytes Technology

PureTech Health plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PureTech Health plc are ranked lower than 3 (%) 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.

Bytes Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bytes Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with PureTech Health and Bytes Technology

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

The idea behind PureTech Health plc and Bytes Technology 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.