Correlation Between Haleon Plc and Soleno Therapeutics

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

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

Diversification Opportunities for Haleon Plc and Soleno Therapeutics

0.08

Correlation Coefficient

Haleon Plc  Soleno Therapeutics

Significant diversification

The 3 months correlation between Haleon and Soleno is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Haleon plc and Soleno Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soleno Therapeutics 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 Soleno Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soleno Therapeutics has no effect on the direction of Haleon Plc i.e., Haleon Plc and Soleno Therapeutics go up and down completely randomly.

Pair Corralation between Haleon Plc and Soleno Therapeutics

Considering the 90-day investment horizon Haleon Plc is expected to generate 7.65 times less return on investment than Soleno Therapeutics. But when comparing it to its historical volatility, Haleon plc is 4.01 times less risky than Soleno Therapeutics. It trades about 0.08 of its potential returns per unit of risk. Soleno Therapeutics is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,530  in Soleno Therapeutics on December 28, 2024 and sell it today you would earn a total of  2,534  from holding Soleno Therapeutics or generate 55.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Haleon plc  vs.  Soleno Therapeutics

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.

Soleno Therapeutics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Soleno Therapeutics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Soleno Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Haleon Plc and Soleno Therapeutics

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

The idea behind Haleon plc and Soleno Therapeutics 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.