Correlation Between PureTech Health and Gamma Communications

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

Diversification Opportunities for PureTech Health and Gamma Communications

-0.53

Correlation Coefficient

PureTech Health  Gamma Communications

Excellent diversification

The 3 months correlation between PureTech and Gamma is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding PureTech Health plc and Gamma Communications PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications PLC 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 Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications PLC has no effect on the direction of PureTech Health i.e., PureTech Health and Gamma Communications go up and down completely randomly.

Pair Corralation between PureTech Health and Gamma Communications

Assuming the 90 days trading horizon PureTech Health is expected to generate 1.8 times less return on investment than Gamma Communications. In addition to that, PureTech Health is 1.69 times more volatile than Gamma Communications PLC. It trades about 0.04 of its total potential returns per unit of risk. Gamma Communications PLC is currently generating about 0.11 per unit of volatility. If you would invest  104,770  in Gamma Communications PLC on September 2, 2024 and sell it today you would earn a total of  53,230  from holding Gamma Communications PLC or generate 50.81% return on investment over 90 days.

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

PureTech Health plc  vs.  Gamma Communications PLC

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. In spite of comparatively stable basic indicators, PureTech Health is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Gamma Communications PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gamma Communications PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gamma Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PureTech Health and Gamma Communications

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

The idea behind PureTech Health plc and Gamma Communications 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.