Correlation Between Halma PLC and KeppelLimited

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

By analyzing existing cross correlation between Halma PLC and Keppel Limited, you can compare the effects of market volatilities on Halma PLC and KeppelLimited 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 Halma PLC with a short position of KeppelLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Halma PLC and KeppelLimited.

Diversification Opportunities for Halma PLC and KeppelLimited

0.29

Correlation Coefficient

Halma PLC  KeppelLimited

Modest diversification

The 3 months correlation between Halma and KeppelLimited is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Halma PLC and Keppel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keppel Limited and Halma 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 Halma PLC are associated (or correlated) with KeppelLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keppel Limited has no effect on the direction of Halma PLC i.e., Halma PLC and KeppelLimited go up and down completely randomly.

Pair Corralation between Halma PLC and KeppelLimited

Assuming the 90 days horizon Halma PLC is expected to generate 25.43 times less return on investment than KeppelLimited. But when comparing it to its historical volatility, Halma PLC is 1.17 times less risky than KeppelLimited. It trades about 0.0 of its potential returns per unit of risk. Keppel Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  985.00  in Keppel Limited on December 20, 2024 and sell it today you would earn a total of  58.00  from holding Keppel Limited or generate 5.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

Halma PLC  vs.  Keppel Limited

Halma PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Halma PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Halma PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Keppel Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Keppel Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, KeppelLimited may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Halma PLC and KeppelLimited

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

The idea behind Halma PLC and Keppel Limited 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.