Correlation Between Haleon Plc and Catalent

Can any of the company-specific risk be diversified away by investing in both Haleon Plc and Catalent 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 Catalent into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Haleon plc and Catalent, you can compare the effects of market volatilities on Haleon Plc and Catalent 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 Catalent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haleon Plc and Catalent.

Diversification Opportunities for Haleon Plc and Catalent

0.4

Correlation Coefficient

Haleon Plc  Catalent

Very weak diversification

The 3 months correlation between Haleon and Catalent is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Haleon plc and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent 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 Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of Haleon Plc i.e., Haleon Plc and Catalent go up and down completely randomly.

Pair Corralation between Haleon Plc and Catalent

Considering the 90-day investment horizon Haleon plc is expected to under-perform the Catalent. In addition to that, Haleon Plc is 1.58 times more volatile than Catalent. It trades about -0.08 of its total potential returns per unit of risk. Catalent is currently generating about 0.02 per unit of volatility. If you would invest  6,070  in Catalent on September 2, 2024 and sell it today you would earn a total of  41.00  from holding Catalent or generate 0.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Haleon plc  vs.  Catalent

Haleon plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haleon plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Haleon Plc is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Catalent

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Haleon Plc and Catalent

The main advantage of trading using opposite Haleon Plc and Catalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haleon Plc position performs unexpectedly, Catalent 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 Catalent will offset losses from the drop in Catalent's long position.

The idea behind Haleon plc and Catalent 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.