Correlation Between Haleon Plc and Earth Science

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

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

Diversification Opportunities for Haleon Plc and Earth Science

0.73

Correlation Coefficient

Haleon Plc  Earth Science

Poor diversification

The 3 months correlation between Haleon and Earth is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Haleon plc and Earth Science Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Earth Science Tech 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 Earth Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Earth Science Tech has no effect on the direction of Haleon Plc i.e., Haleon Plc and Earth Science go up and down completely randomly.

Pair Corralation between Haleon Plc and Earth Science

Considering the 90-day investment horizon Haleon Plc is expected to generate 10.52 times less return on investment than Earth Science. But when comparing it to its historical volatility, Haleon plc is 20.55 times less risky than Earth Science. It trades about 0.1 of its potential returns per unit of risk. Earth Science Tech is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Earth Science Tech on September 12, 2024 and sell it today you would lose (1.00) from holding Earth Science Tech or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Haleon plc  vs.  Earth Science Tech

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 latest weak performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Earth Science Tech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Earth Science Tech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Earth Science may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Haleon Plc and Earth Science

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

The idea behind Haleon plc and Earth Science Tech 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.