Correlation Between Haleon PLC and Merck KGaA
Can any of the company-specific risk be diversified away by investing in both Haleon PLC and Merck KGaA 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 Haleon PLC and Merck KGaA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Haleon PLC and Merck KGaA, you can compare the effects of market volatilities on Haleon PLC and Merck KGaA 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 Haleon PLC with a short position of Merck KGaA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haleon PLC and Merck KGaA.
Diversification Opportunities for Haleon PLC and Merck KGaA
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Haleon and Merck is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Haleon PLC and Merck KGaA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck KGaA and Haleon 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 Haleon PLC are associated (or correlated) with Merck KGaA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck KGaA has no effect on the direction of Haleon PLC i.e., Haleon PLC and Merck KGaA go up and down completely randomly.
Pair Corralation between Haleon PLC and Merck KGaA
Assuming the 90 days horizon Haleon PLC is expected to generate 4.05 times less return on investment than Merck KGaA. In addition to that, Haleon PLC is 1.38 times more volatile than Merck KGaA. It trades about 0.06 of its total potential returns per unit of risk. Merck KGaA is currently generating about 0.31 per unit of volatility. If you would invest 14,035 in Merck KGaA on November 2, 2024 and sell it today you would earn a total of 1,115 from holding Merck KGaA or generate 7.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Haleon PLC vs. Merck KGaA
Performance |
| Timeline |
| Haleon PLC |
| Merck KGaA |
Haleon PLC and Merck KGaA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Haleon PLC and Merck KGaA
The main advantage of trading using opposite Haleon PLC and Merck KGaA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haleon PLC position performs unexpectedly, Merck KGaA 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 Merck KGaA will offset losses from the drop in Merck KGaA's long position.| Haleon PLC vs. FIREWEED METALS P | Haleon PLC vs. De Grey Mining | Haleon PLC vs. MAGNUM MINING EXP | Haleon PLC vs. Perseus Mining Limited |
| Merck KGaA vs. UNIVMUSIC GRPADR050 | Merck KGaA vs. Perseus Mining Limited | Merck KGaA vs. MagnaChip Semiconductor Corp | Merck KGaA vs. NXP Semiconductors NV |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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