Correlation Between PureTech Health and Polar Capital

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

Diversification Opportunities for PureTech Health and Polar Capital

0.56

Correlation Coefficient

PureTech Health  Polar Capital

Very weak diversification

The 3 months correlation between PureTech and Polar is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding PureTech Health plc and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital 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 Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of PureTech Health i.e., PureTech Health and Polar Capital go up and down completely randomly.

Pair Corralation between PureTech Health and Polar Capital

Assuming the 90 days trading horizon PureTech Health plc is expected to under-perform the Polar Capital. But the stock apears to be less risky and, when comparing its historical volatility, PureTech Health plc is 1.07 times less risky than Polar Capital. The stock trades about -0.16 of its potential returns per unit of risk. The Polar Capital Technology is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  34,900  in Polar Capital Technology on December 23, 2024 and sell it today you would lose (4,200) from holding Polar Capital Technology or give up 12.03% of portfolio value over 90 days.

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

PureTech Health plc  vs.  Polar Capital Technology

PureTech Health plc

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Polar Capital Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polar Capital Technology 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 Polar Capital

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

The idea behind PureTech Health plc and Polar Capital 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.