Correlation Between KeppelLimited and Halma PLC

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

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

Diversification Opportunities for KeppelLimited and Halma PLC

0.29

Correlation Coefficient

KeppelLimited  Halma PLC

Modest diversification

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

Pair Corralation between KeppelLimited and Halma PLC

Assuming the 90 days horizon Keppel Limited is expected to generate 1.17 times more return on investment than Halma PLC. However, KeppelLimited is 1.17 times more volatile than Halma PLC. It trades about 0.05 of its potential returns per unit of risk. Halma PLC is currently generating about 0.0 per unit of risk. 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

Keppel Limited  vs.  Halma PLC

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.

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.

Pair Trading with KeppelLimited and Halma PLC

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

The idea behind Keppel Limited and Halma 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.

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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.