Correlation Between Haleon Plc and Redhill Biopharma

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

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

Diversification Opportunities for Haleon Plc and Redhill Biopharma

-0.83

Correlation Coefficient

Haleon Plc  Redhill Biopharma

Pay attention - limited upside

The 3 months correlation between Haleon and Redhill is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Haleon plc and Redhill Biopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redhill Biopharma and Haleon 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 Haleon plc are associated (or correlated) with Redhill Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redhill Biopharma has no effect on the direction of Haleon Plc i.e., Haleon Plc and Redhill Biopharma go up and down completely randomly.

Pair Corralation between Haleon Plc and Redhill Biopharma

Considering the 90-day investment horizon Haleon plc is expected to generate 0.3 times more return on investment than Redhill Biopharma. However, Haleon plc is 3.32 times less risky than Redhill Biopharma. It trades about 0.08 of its potential returns per unit of risk. Redhill Biopharma is currently generating about -0.28 per unit of risk. If you would invest  951.00  in Haleon plc on December 29, 2024 and sell it today you would earn a total of  61.00  from holding Haleon plc or generate 6.41% return on investment over 90 days.

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

Haleon plc  vs.  Redhill Biopharma

Haleon plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Haleon plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Haleon Plc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Redhill Biopharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Redhill Biopharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Haleon Plc and Redhill Biopharma

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

The idea behind Haleon plc and Redhill Biopharma 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 Global Correlations module to find global opportunities by holding instruments from different markets.