Correlation Between Haleon Plc and Orexo AB

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

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

Diversification Opportunities for Haleon Plc and Orexo AB

0.84

Correlation Coefficient

Haleon Plc  Orexo AB

Very poor diversification

The 3 months correlation between Haleon and Orexo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Haleon plc and Orexo AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orexo AB 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 Orexo AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orexo AB has no effect on the direction of Haleon Plc i.e., Haleon Plc and Orexo AB go up and down completely randomly.

Pair Corralation between Haleon Plc and Orexo AB

Considering the 90-day investment horizon Haleon plc is expected to generate 0.27 times more return on investment than Orexo AB. However, Haleon plc is 3.65 times less risky than Orexo AB. It trades about -0.08 of its potential returns per unit of risk. Orexo AB is currently generating about -0.12 per unit of risk. If you would invest  1,016  in Haleon plc on September 3, 2024 and sell it today you would lose (50.00) from holding Haleon plc or give up 4.92% of portfolio value over 90 days.

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

Haleon plc  vs.  Orexo AB

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 current stock price disarray, may contribute to short-term losses for the investors.

Orexo AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orexo AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Haleon Plc and Orexo AB

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

The idea behind Haleon plc and Orexo AB 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.