Correlation Between Bank Central and Haleon Plc
Can any of the company-specific risk be diversified away by investing in both Bank Central 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 Bank Central and Haleon Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Central Asia and Haleon plc, you can compare the effects of market volatilities on Bank Central 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 Bank Central with a short position of Haleon Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Central and Haleon Plc.
Diversification Opportunities for Bank Central and Haleon Plc
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Haleon is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Haleon plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haleon plc and Bank Central 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 Bank Central Asia 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 Bank Central i.e., Bank Central and Haleon Plc go up and down completely randomly.
Pair Corralation between Bank Central and Haleon Plc
Assuming the 90 days horizon Bank Central Asia is expected to under-perform the Haleon Plc. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank Central Asia is 1.17 times less risky than Haleon Plc. The pink sheet trades about -0.29 of its potential returns per unit of risk. The Haleon plc is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 480.00 in Haleon plc on August 27, 2024 and sell it today you would lose (6.00) from holding Haleon plc or give up 1.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Central Asia vs. Haleon plc
Performance |
| Timeline |
| Bank Central Asia |
| Haleon plc |
Bank Central and Haleon Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Central and Haleon Plc
The main advantage of trading using opposite Bank Central and Haleon Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Central 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 Bank Central Asia 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.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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