Correlation Between Redhill Biopharma and Emergent Biosolutions

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

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

Diversification Opportunities for Redhill Biopharma and Emergent Biosolutions

-0.6

Correlation Coefficient

Redhill Biopharma  Emergent Biosolutions

Excellent diversification

The 3 months correlation between Redhill and Emergent is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Redhill Biopharma and Emergent Biosolutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emergent Biosolutions and Redhill Biopharma 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 Redhill Biopharma are associated (or correlated) with Emergent Biosolutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emergent Biosolutions has no effect on the direction of Redhill Biopharma i.e., Redhill Biopharma and Emergent Biosolutions go up and down completely randomly.

Pair Corralation between Redhill Biopharma and Emergent Biosolutions

Given the investment horizon of 90 days Redhill Biopharma is expected to under-perform the Emergent Biosolutions. In addition to that, Redhill Biopharma is 1.72 times more volatile than Emergent Biosolutions. It trades about 0.0 of its total potential returns per unit of risk. Emergent Biosolutions is currently generating about 0.03 per unit of volatility. If you would invest  1,191  in Emergent Biosolutions on August 31, 2024 and sell it today you would lose (180.00) from holding Emergent Biosolutions or give up 15.11% of portfolio value over 90 days.

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

Redhill Biopharma  vs.  Emergent Biosolutions

Redhill Biopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Redhill Biopharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, Redhill Biopharma is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Emergent Biosolutions

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emergent Biosolutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental drivers, Emergent Biosolutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Redhill Biopharma and Emergent Biosolutions

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

The idea behind Redhill Biopharma and Emergent Biosolutions 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.