Correlation Between Haleon Plc and AstraZeneca PLC

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

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

Diversification Opportunities for Haleon Plc and AstraZeneca PLC

0.78

Correlation Coefficient

Haleon Plc  AstraZeneca PLC

Poor diversification

The 3 months correlation between Haleon and AstraZeneca is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Haleon plc and AstraZeneca PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC ADR 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC ADR has no effect on the direction of Haleon Plc i.e., Haleon Plc and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Haleon Plc and AstraZeneca PLC

Considering the 90-day investment horizon Haleon plc is expected to generate 0.64 times more return on investment than AstraZeneca PLC. However, Haleon plc is 1.57 times less risky than AstraZeneca PLC. It trades about -0.08 of its potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about -0.25 per unit of risk. If you would invest  1,016  in Haleon plc on September 3, 2024 and sell it today you would lose (50.00) from holding Haleon plc or give up 4.92% of portfolio value over 90 days.

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

Haleon plc  vs.  AstraZeneca PLC ADR

Haleon plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haleon plc has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

AstraZeneca PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AstraZeneca PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Haleon Plc and AstraZeneca PLC

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

The idea behind Haleon plc and AstraZeneca PLC ADR 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.