Correlation Between Xaar Plc and PureTech Health

Can any of the company-specific risk be diversified away by investing in both Xaar Plc and PureTech 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 Xaar Plc and PureTech Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xaar plc and PureTech Health plc, you can compare the effects of market volatilities on Xaar Plc and PureTech 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 Xaar Plc with a short position of PureTech Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xaar Plc and PureTech Health.

Diversification Opportunities for Xaar Plc and PureTech Health

-0.61

Correlation Coefficient

Xaar Plc  PureTech Health

Excellent diversification

The 3 months correlation between Xaar and PureTech is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Xaar plc and PureTech Health plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PureTech Health plc and Xaar Plc 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 Xaar plc are associated (or correlated) with PureTech Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PureTech Health plc has no effect on the direction of Xaar Plc i.e., Xaar Plc and PureTech Health go up and down completely randomly.

Pair Corralation between Xaar Plc and PureTech Health

Assuming the 90 days trading horizon Xaar plc is expected to generate 1.43 times more return on investment than PureTech Health. However, Xaar Plc is 1.43 times more volatile than PureTech Health plc. It trades about -0.01 of its potential returns per unit of risk. PureTech Health plc is currently generating about -0.03 per unit of risk. If you would invest  10,000  in Xaar plc on October 9, 2024 and sell it today you would lose (1,800) from holding Xaar plc or give up 18.0% of portfolio value over 90 days.

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

Xaar plc  vs.  PureTech Health plc

Xaar plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xaar 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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.

Pair Trading with Xaar Plc and PureTech Health

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

The idea behind Xaar plc and PureTech 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .