Correlation Between Reckitt Benckiser and Macfarlane Group
Can any of the company-specific risk be diversified away by investing in both Reckitt Benckiser and Macfarlane Group 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 Reckitt Benckiser and Macfarlane Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reckitt Benckiser Group and Macfarlane Group PLC, you can compare the effects of market volatilities on Reckitt Benckiser and Macfarlane Group 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 Reckitt Benckiser with a short position of Macfarlane Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reckitt Benckiser and Macfarlane Group.
Diversification Opportunities for Reckitt Benckiser and Macfarlane Group
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Reckitt and Macfarlane is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Reckitt Benckiser Group and Macfarlane Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macfarlane Group PLC and Reckitt Benckiser 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 Reckitt Benckiser Group are associated (or correlated) with Macfarlane Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macfarlane Group PLC has no effect on the direction of Reckitt Benckiser i.e., Reckitt Benckiser and Macfarlane Group go up and down completely randomly.
Pair Corralation between Reckitt Benckiser and Macfarlane Group
Assuming the 90 days trading horizon Reckitt Benckiser Group is expected to generate 0.97 times more return on investment than Macfarlane Group. However, Reckitt Benckiser Group is 1.03 times less risky than Macfarlane Group. It trades about 0.06 of its potential returns per unit of risk. Macfarlane Group PLC is currently generating about -0.06 per unit of risk. If you would invest 441,144 in Reckitt Benckiser Group on September 3, 2024 and sell it today you would earn a total of 44,756 from holding Reckitt Benckiser Group or generate 10.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reckitt Benckiser Group vs. Macfarlane Group PLC
Performance |
| Timeline |
| Reckitt Benckiser |
| Macfarlane Group PLC |
Reckitt Benckiser and Macfarlane Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reckitt Benckiser and Macfarlane Group
The main advantage of trading using opposite Reckitt Benckiser and Macfarlane Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reckitt Benckiser position performs unexpectedly, Macfarlane Group 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 Macfarlane Group will offset losses from the drop in Macfarlane Group's long position.| Reckitt Benckiser vs. Gaztransport et Technigaz | Reckitt Benckiser vs. Medical Properties Trust | Reckitt Benckiser vs. AMG Advanced Metallurgical | Reckitt Benckiser vs. Deltex Medical Group |
| Macfarlane Group vs. Lundin Mining Corp | Macfarlane Group vs. Anglesey Mining | Macfarlane Group vs. Abingdon Health Plc | Macfarlane Group vs. Worldwide Healthcare Trust |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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