Correlation Between MPH Health and Haleon PLC
Can any of the company-specific risk be diversified away by investing in both MPH Health and Haleon PLC 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 MPH Health and Haleon PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MPH Health Care and Haleon PLC, you can compare the effects of market volatilities on MPH Health and Haleon PLC 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 MPH Health with a short position of Haleon PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of MPH Health and Haleon PLC.
Diversification Opportunities for MPH Health and Haleon PLC
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between MPH and Haleon is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding MPH Health Care and Haleon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haleon PLC and MPH 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 MPH Health Care are associated (or correlated) with Haleon PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haleon PLC has no effect on the direction of MPH Health i.e., MPH Health and Haleon PLC go up and down completely randomly.
Pair Corralation between MPH Health and Haleon PLC
Assuming the 90 days trading horizon MPH Health Care is expected to generate 2.08 times more return on investment than Haleon PLC. However, MPH Health is 2.08 times more volatile than Haleon PLC. It trades about 0.01 of its potential returns per unit of risk. Haleon PLC is currently generating about -0.05 per unit of risk. If you would invest 2,400 in MPH Health Care on October 10, 2024 and sell it today you would earn a total of 0.00 from holding MPH Health Care or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.44% |
| Values | Daily Returns |
MPH Health Care vs. Haleon PLC
Performance |
| Timeline |
| MPH Health Care |
| Haleon PLC |
MPH Health and Haleon PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MPH Health and Haleon PLC
The main advantage of trading using opposite MPH Health and Haleon PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MPH Health position performs unexpectedly, Haleon PLC 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 Haleon PLC will offset losses from the drop in Haleon PLC's long position.The idea behind MPH Health Care and Haleon 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.| Haleon PLC vs. Mitsui Chemicals | Haleon PLC vs. Ultra Clean Holdings | Haleon PLC vs. CLEAN ENERGY FUELS | Haleon PLC vs. ALERION CLEANPOWER |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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