Correlation Between AstraZeneca PLC and GSK Plc
Can any of the company-specific risk be diversified away by investing in both AstraZeneca PLC and GSK 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 AstraZeneca PLC and GSK Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AstraZeneca PLC and GSK plc, you can compare the effects of market volatilities on AstraZeneca PLC and GSK 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 AstraZeneca PLC with a short position of GSK Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of AstraZeneca PLC and GSK Plc.
Diversification Opportunities for AstraZeneca PLC and GSK Plc
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AstraZeneca and GSK is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC and GSK plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSK plc and AstraZeneca 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 AstraZeneca PLC are associated (or correlated) with GSK Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSK plc has no effect on the direction of AstraZeneca PLC i.e., AstraZeneca PLC and GSK Plc go up and down completely randomly.
Pair Corralation between AstraZeneca PLC and GSK Plc
Assuming the 90 days trading horizon AstraZeneca PLC is expected to under-perform the GSK Plc. In addition to that, AstraZeneca PLC is 1.5 times more volatile than GSK plc. It trades about -0.17 of its total potential returns per unit of risk. GSK plc is currently generating about -0.14 per unit of volatility. If you would invest 4,308 in GSK plc on August 29, 2024 and sell it today you would lose (264.00) from holding GSK plc or give up 6.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AstraZeneca PLC vs. GSK plc
Performance |
| Timeline |
| AstraZeneca PLC |
| GSK plc |
AstraZeneca PLC and GSK Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AstraZeneca PLC and GSK Plc
The main advantage of trading using opposite AstraZeneca PLC and GSK Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AstraZeneca PLC position performs unexpectedly, GSK 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 GSK Plc will offset losses from the drop in GSK Plc's long position.| AstraZeneca PLC vs. MAHLE Metal Leve | AstraZeneca PLC vs. Livetech da Bahia | AstraZeneca PLC vs. Monster Beverage | AstraZeneca PLC vs. Unifique Telecomunicaes SA |
| GSK Plc vs. Dell Technologies | GSK Plc vs. Lupatech SA | GSK Plc vs. Tres Tentos Agroindustrial | GSK Plc vs. Spotify Technology SA |
Check out your portfolio center.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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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