Correlation Between Halma Plc and ABB PAR
Can any of the company-specific risk be diversified away by investing in both Halma Plc and ABB PAR 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 Halma Plc and ABB PAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Halma plc and ABB PAR AB, you can compare the effects of market volatilities on Halma Plc and ABB PAR 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 Halma Plc with a short position of ABB PAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Halma Plc and ABB PAR.
Diversification Opportunities for Halma Plc and ABB PAR
Good diversification
The 3 months correlation between Halma and ABB is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Halma plc and ABB PAR AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB PAR AB and Halma Plc 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 Halma plc are associated (or correlated) with ABB PAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB PAR AB has no effect on the direction of Halma Plc i.e., Halma Plc and ABB PAR go up and down completely randomly.
Pair Corralation between Halma Plc and ABB PAR
Assuming the 90 days horizon Halma plc is expected to generate 1.37 times more return on investment than ABB PAR. However, Halma Plc is 1.37 times more volatile than ABB PAR AB. It trades about 0.05 of its potential returns per unit of risk. ABB PAR AB is currently generating about -0.16 per unit of risk. If you would invest 3,239 in Halma plc on September 28, 2024 and sell it today you would earn a total of 39.00 from holding Halma plc or generate 1.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Halma plc vs. ABB PAR AB
Performance |
| Timeline |
| Halma plc |
| ABB PAR AB |
Halma Plc and ABB PAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Halma Plc and ABB PAR
The main advantage of trading using opposite Halma Plc and ABB PAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Halma Plc position performs unexpectedly, ABB PAR 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 ABB PAR will offset losses from the drop in ABB PAR's long position.| Halma Plc vs. ABB PAR AB | Halma Plc vs. ASSA ABLOY AB | Halma Plc vs. SECOM LTD | Halma Plc vs. Allegion plc |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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