Correlation Between Zoetis and PureTech Health

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

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

Diversification Opportunities for Zoetis and PureTech Health

0.16

Correlation Coefficient

Zoetis  PureTech Health

Average diversification

The 3 months correlation between Zoetis and PureTech is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Zoetis Inc 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 Zoetis 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 Zoetis Inc 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 Zoetis i.e., Zoetis and PureTech Health go up and down completely randomly.

Pair Corralation between Zoetis and PureTech Health

Considering the 90-day investment horizon Zoetis is expected to generate 2.71 times less return on investment than PureTech Health. But when comparing it to its historical volatility, Zoetis Inc is 1.8 times less risky than PureTech Health. It trades about 0.02 of its potential returns per unit of risk. PureTech Health PLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,898  in PureTech Health PLC on December 29, 2024 and sell it today you would earn a total of  36.00  from holding PureTech Health PLC or generate 1.9% return on investment over 90 days.

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

Zoetis Inc  vs.  PureTech Health PLC

Zoetis Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zoetis Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Zoetis is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

PureTech Health PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PureTech Health PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, PureTech Health is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Zoetis and PureTech Health

The main advantage of trading using opposite Zoetis and PureTech Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoetis 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 Zoetis Inc 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.