Correlation Between PureTech Health and Naked Wines
Can any of the company-specific risk be diversified away by investing in both PureTech Health and Naked Wines 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 Naked Wines 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 Naked Wines plc, you can compare the effects of market volatilities on PureTech Health and Naked Wines 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 Naked Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of PureTech Health and Naked Wines.
Diversification Opportunities for PureTech Health and Naked Wines
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between PureTech and Naked is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding PureTech Health plc and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines 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 Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of PureTech Health i.e., PureTech Health and Naked Wines go up and down completely randomly.
Pair Corralation between PureTech Health and Naked Wines
Assuming the 90 days trading horizon PureTech Health plc is expected to generate 0.68 times more return on investment than Naked Wines. However, PureTech Health plc is 1.46 times less risky than Naked Wines. It trades about -0.04 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.04 per unit of risk. If you would invest 26,100 in PureTech Health plc on October 11, 2024 and sell it today you would lose (12,100) from holding PureTech Health plc or give up 46.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
PureTech Health plc vs. Naked Wines plc
Performance |
| Timeline |
| PureTech Health plc |
| Naked Wines plc |
PureTech Health and Naked Wines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PureTech Health and Naked Wines
The main advantage of trading using opposite PureTech Health and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PureTech Health position performs unexpectedly, Naked Wines 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 Naked Wines will offset losses from the drop in Naked Wines' long position.| PureTech Health vs. Check Point Software | PureTech Health vs. CVS Health Corp | PureTech Health vs. Vitec Software Group | PureTech Health vs. Zurich Insurance Group |
| Naked Wines vs. Dairy Farm International | Naked Wines vs. Batm Advanced Communications | Naked Wines vs. Cairo Communication SpA | Naked Wines vs. Axway Software SA |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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