Correlation Between Haleon PLC and Broadcom
Can any of the company-specific risk be diversified away by investing in both Haleon PLC and Broadcom 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 Broadcom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Haleon PLC and Broadcom, you can compare the effects of market volatilities on Haleon PLC and Broadcom 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 Broadcom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haleon PLC and Broadcom.
Diversification Opportunities for Haleon PLC and Broadcom
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Haleon and Broadcom is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Haleon PLC and Broadcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadcom 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 Broadcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadcom has no effect on the direction of Haleon PLC i.e., Haleon PLC and Broadcom go up and down completely randomly.
Pair Corralation between Haleon PLC and Broadcom
Assuming the 90 days trading horizon Haleon PLC is expected to generate 170.71 times less return on investment than Broadcom. But when comparing it to its historical volatility, Haleon PLC is 88.78 times less risky than Broadcom. It trades about 0.05 of its potential returns per unit of risk. Broadcom is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 8,480 in Broadcom on September 12, 2024 and sell it today you would earn a total of 8,619 from holding Broadcom or generate 101.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Haleon PLC vs. Broadcom
Performance |
| Timeline |
| Haleon PLC |
| Broadcom |
Haleon PLC and Broadcom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Haleon PLC and Broadcom
The main advantage of trading using opposite Haleon PLC and Broadcom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haleon PLC position performs unexpectedly, Broadcom 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 Broadcom will offset losses from the drop in Broadcom's long position.| Haleon PLC vs. BioNTech SE | Haleon PLC vs. Universal Display Corp | Haleon PLC vs. Creo Medical Group | Haleon PLC vs. L3Harris Technologies |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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