Correlation Between Bayer AG and GlaxoSmithKline PLC
Can any of the company-specific risk be diversified away by investing in both Bayer AG and GlaxoSmithKline 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 Bayer AG and GlaxoSmithKline PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bayer AG PK and GlaxoSmithKline PLC ADR, you can compare the effects of market volatilities on Bayer AG and GlaxoSmithKline 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 Bayer AG with a short position of GlaxoSmithKline PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayer AG and GlaxoSmithKline PLC.
Diversification Opportunities for Bayer AG and GlaxoSmithKline PLC
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bayer and GlaxoSmithKline is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bayer AG PK and GlaxoSmithKline PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlaxoSmithKline PLC ADR and Bayer AG 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 Bayer AG PK are associated (or correlated) with GlaxoSmithKline PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlaxoSmithKline PLC ADR has no effect on the direction of Bayer AG i.e., Bayer AG and GlaxoSmithKline PLC go up and down completely randomly.
Pair Corralation between Bayer AG and GlaxoSmithKline PLC
If you would invest 3,369 in GlaxoSmithKline PLC ADR on November 18, 2024 and sell it today you would earn a total of 248.00 from holding GlaxoSmithKline PLC ADR or generate 7.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Bayer AG PK vs. GlaxoSmithKline PLC ADR
Performance |
| Timeline |
| Bayer AG PK |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
| GlaxoSmithKline PLC ADR |
Bayer AG and GlaxoSmithKline PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bayer AG and GlaxoSmithKline PLC
The main advantage of trading using opposite Bayer AG and GlaxoSmithKline PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayer AG position performs unexpectedly, GlaxoSmithKline 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 GlaxoSmithKline PLC will offset losses from the drop in GlaxoSmithKline PLC's long position.| Bayer AG vs. Novartis AG ADR | Bayer AG vs. Sanofi ADR | Bayer AG vs. AstraZeneca PLC ADR | Bayer AG vs. GlaxoSmithKline PLC ADR |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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