Correlation Between Haleon Plc and Neurocrine Biosciences

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

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

Diversification Opportunities for Haleon Plc and Neurocrine Biosciences

0.28

Correlation Coefficient

Haleon Plc  Neurocrine Biosciences

Modest diversification

The 3 months correlation between Haleon and Neurocrine is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Haleon plc and Neurocrine Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neurocrine Biosciences 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 Neurocrine Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neurocrine Biosciences has no effect on the direction of Haleon Plc i.e., Haleon Plc and Neurocrine Biosciences go up and down completely randomly.

Pair Corralation between Haleon Plc and Neurocrine Biosciences

Considering the 90-day investment horizon Haleon Plc is expected to generate 2.59 times less return on investment than Neurocrine Biosciences. But when comparing it to its historical volatility, Haleon plc is 1.03 times less risky than Neurocrine Biosciences. It trades about 0.03 of its potential returns per unit of risk. Neurocrine Biosciences is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,190  in Neurocrine Biosciences on January 31, 2024 and sell it today you would earn a total of  5,699  from holding Neurocrine Biosciences or generate 69.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.89%
Values	Daily Returns

Haleon plc  vs.  Neurocrine Biosciences

Haleon plc

Risk-Adjusted Performance

4 of 100

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.

Neurocrine Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neurocrine Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Neurocrine Biosciences is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Haleon Plc and Neurocrine Biosciences

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

The idea behind Haleon plc and Neurocrine Biosciences 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.