Correlation Between Catalent and Haleon Plc

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

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

Diversification Opportunities for Catalent and Haleon Plc

0.4

Correlation Coefficient

Catalent  Haleon Plc

Very weak diversification

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

Pair Corralation between Catalent and Haleon Plc

Given the investment horizon of 90 days Catalent is expected to generate 2.33 times more return on investment than Haleon Plc. However, Catalent is 2.33 times more volatile than Haleon plc. It trades about 0.04 of its potential returns per unit of risk. Haleon plc is currently generating about 0.04 per unit of risk. If you would invest  4,550  in Catalent on September 2, 2024 and sell it today you would earn a total of  1,561  from holding Catalent or generate 34.31% return on investment over 90 days.

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

Catalent  vs.  Haleon plc

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.

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.

Pair Trading with Catalent and Haleon Plc

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

The idea behind Catalent and Haleon plc 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.