Correlation Between Connect Biopharma and Verona Pharma

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

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

Diversification Opportunities for Connect Biopharma and Verona Pharma

0.78

Correlation Coefficient

Connect Biopharma  Verona Pharma

Poor diversification

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

Pair Corralation between Connect Biopharma and Verona Pharma

Given the investment horizon of 90 days Connect Biopharma Holdings is expected to generate 2.28 times more return on investment than Verona Pharma. However, Connect Biopharma is 2.28 times more volatile than Verona Pharma PLC. It trades about 0.23 of its potential returns per unit of risk. Verona Pharma PLC is currently generating about 0.22 per unit of risk. If you would invest  80.00  in Connect Biopharma Holdings on May 7, 2025 and sell it today you would earn a total of  124.00  from holding Connect Biopharma Holdings or generate 155.0% return on investment over 90 days.

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

Connect Biopharma Holdings  vs.  Verona Pharma PLC

Connect Biopharma

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Connect Biopharma Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Connect Biopharma sustained solid returns over the last few months and may actually be approaching a breakup point.

Verona Pharma PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Verona Pharma PLC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Verona Pharma sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Connect Biopharma and Verona Pharma

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

The idea behind Connect Biopharma Holdings and Verona Pharma PLC 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.