Correlation Between Haleon Plc and Vir Biotechnology

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

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

Diversification Opportunities for Haleon Plc and Vir Biotechnology

-0.59

Correlation Coefficient

Haleon Plc  Vir Biotechnology

Excellent diversification

The 3 months correlation between Haleon and Vir is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Haleon plc and Vir Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vir Biotechnology 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 Vir Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vir Biotechnology has no effect on the direction of Haleon Plc i.e., Haleon Plc and Vir Biotechnology go up and down completely randomly.

Pair Corralation between Haleon Plc and Vir Biotechnology

Considering the 90-day investment horizon Haleon plc is expected to generate 0.17 times more return on investment than Vir Biotechnology. However, Haleon plc is 5.88 times less risky than Vir Biotechnology. It trades about 0.06 of its potential returns per unit of risk. Vir Biotechnology is currently generating about 0.01 per unit of risk. If you would invest  964.00  in Haleon plc on December 27, 2024 and sell it today you would earn a total of  41.00  from holding Haleon plc or generate 4.25% return on investment over 90 days.

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

Haleon plc  vs.  Vir Biotechnology

Haleon plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Haleon plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Haleon Plc is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Vir Biotechnology

Risk-Adjusted Performance

Weak

Over the last 90 days Vir Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Vir Biotechnology is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Haleon Plc and Vir Biotechnology

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

The idea behind Haleon plc and Vir Biotechnology 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.