Correlation Between PureTech Health and Hilton Food

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

Diversification Opportunities for PureTech Health and Hilton Food

0.63

Correlation Coefficient

PureTech Health  Hilton Food

Poor diversification

The 3 months correlation between PureTech and Hilton is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding PureTech Health plc and Hilton Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Food Group 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 Hilton Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Food Group has no effect on the direction of PureTech Health i.e., PureTech Health and Hilton Food go up and down completely randomly.

Pair Corralation between PureTech Health and Hilton Food

Assuming the 90 days trading horizon PureTech Health plc is expected to generate 1.7 times more return on investment than Hilton Food. However, PureTech Health is 1.7 times more volatile than Hilton Food Group. It trades about 0.1 of its potential returns per unit of risk. Hilton Food Group is currently generating about 0.04 per unit of risk. If you would invest  14,260  in PureTech Health plc on September 17, 2024 and sell it today you would earn a total of  2,020  from holding PureTech Health plc or generate 14.17% 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.  Hilton Food Group

PureTech Health plc

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PureTech Health plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PureTech Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hilton Food Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Food Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Hilton Food is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PureTech Health and Hilton Food

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

The idea behind PureTech Health plc and Hilton Food Group 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.