Correlation Between PureTech Health and Trellus Health

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

Diversification Opportunities for PureTech Health and Trellus Health

-0.46

Correlation Coefficient

PureTech Health  Trellus Health

Very good diversification

The 3 months correlation between PureTech and Trellus is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding PureTech Health plc and Trellus Health plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trellus Health 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 Trellus Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trellus Health plc has no effect on the direction of PureTech Health i.e., PureTech Health and Trellus Health go up and down completely randomly.

Pair Corralation between PureTech Health and Trellus Health

Assuming the 90 days trading horizon PureTech Health plc is expected to under-perform the Trellus Health. But the stock apears to be less risky and, when comparing its historical volatility, PureTech Health plc is 38.12 times less risky than Trellus Health. The stock trades about -0.06 of its potential returns per unit of risk. The Trellus Health plc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  68.00  in Trellus Health plc on October 24, 2024 and sell it today you would earn a total of  192.00  from holding Trellus Health plc or generate 282.35% 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.  Trellus Health plc

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Trellus Health plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trellus Health plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Trellus Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PureTech Health and Trellus Health

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

The idea behind PureTech Health plc and Trellus Health 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.