Correlation Between Halma Plc and Prysmian SpA

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

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

Diversification Opportunities for Halma Plc and Prysmian SpA

0.05

Correlation Coefficient

Halma Plc  Prysmian SpA

Significant diversification

The 3 months correlation between Halma and Prysmian is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Halma plc and Prysmian SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prysmian SpA 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 Prysmian SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prysmian SpA has no effect on the direction of Halma Plc i.e., Halma Plc and Prysmian SpA go up and down completely randomly.

Pair Corralation between Halma Plc and Prysmian SpA

Assuming the 90 days horizon Halma Plc is expected to generate 2.05 times less return on investment than Prysmian SpA. But when comparing it to its historical volatility, Halma plc is 1.64 times less risky than Prysmian SpA. It trades about 0.05 of its potential returns per unit of risk. Prysmian SpA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,571  in Prysmian SpA on September 12, 2024 and sell it today you would earn a total of  2,882  from holding Prysmian SpA or generate 80.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.07%
Values	Daily Returns

Halma plc  vs.  Prysmian SpA

Halma plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Halma plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Halma Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Prysmian SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prysmian SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Prysmian SpA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Halma Plc and Prysmian SpA

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

The idea behind Halma plc and Prysmian SpA 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 Commodity Directory module to find actively traded commodities issued by global exchanges.