Correlation Between Perrigo Company and Haier Smart

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

By analyzing existing cross correlation between Perrigo Company PLC and Haier Smart Home, you can compare the effects of market volatilities on Perrigo Company and Haier Smart 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 Perrigo Company with a short position of Haier Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perrigo Company and Haier Smart.

Diversification Opportunities for Perrigo Company and Haier Smart

0.66

Correlation Coefficient

Perrigo Company  Haier Smart

Poor diversification

The 3 months correlation between Perrigo and Haier is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Perrigo Company PLC and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home and Perrigo Company 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 Perrigo Company PLC are associated (or correlated) with Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of Perrigo Company i.e., Perrigo Company and Haier Smart go up and down completely randomly.

Pair Corralation between Perrigo Company and Haier Smart

Given the investment horizon of 90 days Perrigo Company is expected to generate 33.62 times less return on investment than Haier Smart. But when comparing it to its historical volatility, Perrigo Company PLC is 6.41 times less risky than Haier Smart. It trades about 0.02 of its potential returns per unit of risk. Haier Smart Home is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Haier Smart Home on September 12, 2024 and sell it today you would earn a total of  85.00  from holding Haier Smart Home or generate 94.44% return on investment over 90 days.

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

Perrigo Company PLC  vs.  Haier Smart Home

Perrigo Company

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Perrigo Company PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Perrigo Company is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Haier Smart Home

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Haier Smart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Perrigo Company and Haier Smart

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

The idea behind Perrigo Company PLC and Haier Smart Home 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.