Correlation Between Sparebank and PureTech Health
Can any of the company-specific risk be diversified away by investing in both Sparebank 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 Sparebank and PureTech Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparebank 1 SR and PureTech Health plc, you can compare the effects of market volatilities on Sparebank 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 Sparebank with a short position of PureTech Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and PureTech Health.
Diversification Opportunities for Sparebank and PureTech Health
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sparebank and PureTech is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR 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 Sparebank 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 Sparebank 1 SR 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 Sparebank i.e., Sparebank and PureTech Health go up and down completely randomly.
Pair Corralation between Sparebank and PureTech Health
Assuming the 90 days trading horizon Sparebank 1 SR is expected to under-perform the PureTech Health. But the stock apears to be less risky and, when comparing its historical volatility, Sparebank 1 SR is 1.92 times less risky than PureTech Health. The stock trades about -0.02 of its potential returns per unit of risk. The PureTech Health plc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 15,540 in PureTech Health plc on September 2, 2024 and sell it today you would earn a total of 1,140 from holding PureTech Health plc or generate 7.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sparebank 1 SR vs. PureTech Health plc
Performance |
| Timeline |
| Sparebank 1 SR |
| PureTech Health plc |
Sparebank and PureTech Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebank and PureTech Health
The main advantage of trading using opposite Sparebank and PureTech Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank 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.| Sparebank vs. Uniper SE | Sparebank vs. Mulberry Group PLC | Sparebank vs. London Security Plc | Sparebank vs. Triad Group PLC |
| PureTech Health vs. Home Depot | PureTech Health vs. Weiss Korea Opportunity | PureTech Health vs. River and Mercantile | PureTech Health vs. Sherborne Investors Guernsey |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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