Correlation Between ASSA ABLOY and Halma Plc

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Can any of the company-specific risk be diversified away by investing in both ASSA ABLOY and Halma 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 ASSA ABLOY and Halma Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASSA ABLOY AB and Halma plc, you can compare the effects of market volatilities on ASSA ABLOY and Halma 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 ASSA ABLOY with a short position of Halma Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASSA ABLOY and Halma Plc.

Diversification Opportunities for ASSA ABLOY and Halma Plc

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between ASSA and Halma is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ASSA ABLOY AB and Halma plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halma plc and ASSA ABLOY 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 ASSA ABLOY AB are associated (or correlated) with Halma Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halma plc has no effect on the direction of ASSA ABLOY i.e., ASSA ABLOY and Halma Plc go up and down completely randomly.

Pair Corralation between ASSA ABLOY and Halma Plc

Assuming the 90 days trading horizon ASSA ABLOY AB is expected to generate 0.84 times more return on investment than Halma Plc. However, ASSA ABLOY AB is 1.19 times less risky than Halma Plc. It trades about 0.1 of its potential returns per unit of risk. Halma plc is currently generating about 0.05 per unit of risk. If you would invest  1,332  in ASSA ABLOY AB on September 28, 2024 and sell it today you would earn a total of  1,513  from holding ASSA ABLOY AB or generate 113.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

ASSA ABLOY AB  vs.  Halma plc

 Performance 
       Timeline  
ASSA ABLOY AB 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in ASSA ABLOY AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ASSA ABLOY is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Halma plc 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Halma plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Halma Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ASSA ABLOY and Halma Plc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ASSA ABLOY and Halma Plc

The main advantage of trading using opposite ASSA ABLOY and Halma Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASSA ABLOY position performs unexpectedly, Halma 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 Halma Plc will offset losses from the drop in Halma Plc's long position.
The idea behind ASSA ABLOY AB and Halma 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.
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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