Correlation Between PureTech Health and Software Circle

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

Diversification Opportunities for PureTech Health and Software Circle

-0.27

Correlation Coefficient

PureTech Health  Software Circle

Very good diversification

The 3 months correlation between PureTech and Software is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding PureTech Health plc and Software Circle plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Circle 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 Software Circle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Circle plc has no effect on the direction of PureTech Health i.e., PureTech Health and Software Circle go up and down completely randomly.

Pair Corralation between PureTech Health and Software Circle

Assuming the 90 days trading horizon PureTech Health plc is expected to generate 1.23 times more return on investment than Software Circle. However, PureTech Health is 1.23 times more volatile than Software Circle plc. It trades about 0.02 of its potential returns per unit of risk. Software Circle plc is currently generating about -0.08 per unit of risk. If you would invest  13,600  in PureTech Health plc on May 25, 2025 and sell it today you would earn a total of  260.00  from holding PureTech Health plc or generate 1.91% return on investment over 90 days.

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

PureTech Health plc  vs.  Software Circle plc

PureTech Health plc

Risk-Adjusted Performance

Weakest

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 comparatively stable basic indicators, PureTech Health is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Software Circle plc

Risk-Adjusted Performance

Weakest

Over the last 90 days Software Circle plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with PureTech Health and Software Circle

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

The idea behind PureTech Health plc and Software Circle 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.