Correlation Between PureTech Health and Ecofin Global

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

Diversification Opportunities for PureTech Health and Ecofin Global

-0.21

Correlation Coefficient

PureTech Health  Ecofin Global

Very good diversification

The 3 months correlation between PureTech and Ecofin is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding PureTech Health plc and Ecofin Global Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecofin Global Utilities 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 Ecofin Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecofin Global Utilities has no effect on the direction of PureTech Health i.e., PureTech Health and Ecofin Global go up and down completely randomly.

Pair Corralation between PureTech Health and Ecofin Global

Assuming the 90 days trading horizon PureTech Health plc is expected to under-perform the Ecofin Global. In addition to that, PureTech Health is 2.21 times more volatile than Ecofin Global Utilities. It trades about -0.03 of its total potential returns per unit of risk. Ecofin Global Utilities is currently generating about -0.01 per unit of volatility. If you would invest  18,443  in Ecofin Global Utilities on October 4, 2024 and sell it today you would lose (893.00) from holding Ecofin Global Utilities or give up 4.84% of portfolio value over 90 days.

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

PureTech Health plc  vs.  Ecofin Global Utilities

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.

Ecofin Global Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecofin Global Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with PureTech Health and Ecofin Global

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

The idea behind PureTech Health plc and Ecofin Global Utilities 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.