Correlation Between PureTech Health and Axway Software

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

Diversification Opportunities for PureTech Health and Axway Software

0.72

Correlation Coefficient

PureTech Health  Axway Software

Poor diversification

The 3 months correlation between PureTech and Axway is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding PureTech Health plc and Axway Software SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axway Software SA 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 Axway Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axway Software SA has no effect on the direction of PureTech Health i.e., PureTech Health and Axway Software go up and down completely randomly.

Pair Corralation between PureTech Health and Axway Software

Assuming the 90 days trading horizon PureTech Health is expected to generate 3.86 times less return on investment than Axway Software. In addition to that, PureTech Health is 1.76 times more volatile than Axway Software SA. It trades about 0.04 of its total potential returns per unit of risk. Axway Software SA is currently generating about 0.25 per unit of volatility. If you would invest  2,280  in Axway Software SA on August 31, 2024 and sell it today you would earn a total of  490.00  from holding Axway Software SA or generate 21.49% return on investment over 90 days.

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

PureTech Health plc  vs.  Axway Software SA

PureTech Health plc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PureTech Health plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Axway Software SA

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axway Software SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Axway Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PureTech Health and Axway Software

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

The idea behind PureTech Health plc and Axway Software SA 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.